[Senate Hearing 113-198]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 113-198

                        U.S. POLICY TOWARD IRAN
=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 15, 2013

                               __________

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                COMMITTEE ON FOREIGN RELATIONS         

             ROBERT MENENDEZ, New Jersey, Chairman        
BARBARA BOXER, California            BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland         JAMES E. RISCH, Idaho
ROBERT P. CASEY, Jr., Pennsylvania   MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire        RON JOHNSON, Wisconsin
CHRISTOPHER A. COONS, Delaware       JEFF FLAKE, Arizona
RICHARD J. DURBIN, Illinois          JOHN McCAIN, Arizona
TOM UDALL, New Mexico                JOHN BARRASSO, Wyoming
CHRISTOPHER MURPHY, Connecticut      RAND PAUL, Kentucky
TIM KAINE, Virginia
               Daniel E. O'Brien, Staff Director        
        Lester E. Munson III, Republican Staff Director        

                              (ii)        




                            C O N T E N T S

                              ----------                              
                                                                   Page

Cohen, Hon. David S., Under Secretary for Terrorism and Financial 
  Intelligence, U.S. Department of the Treasury, Washington, DC..    11
    Prepared statement...........................................    13
Corker, Hon. Bob, U.S. Senator from Tennessee, opening statement.     2
Menendez, Hon. Robert, U.S. Senator from New Jersey, opening 
  statement......................................................     1
Sherman, Hon. Wendy, Under Secretary for Political Affairs, U.S. 
  Department of State, Washington, DC............................     3
    Prepared statement...........................................     6

              Additional Material Submitted for the Record

OFAC Publication Submitted by David Cohen as an Attachment to his 
  Prepared Statement.............................................    45

                                 (iii)

  

 
                        U.S. POLICY TOWARD IRAN

                              ----------                              


                        WEDNESDAY, MAY 15, 2013

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:02 a.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Robert 
Menendez (chairman of the committee) presiding.
    Present: Senators Menendez, Cardin, Casey, Coons, Udall, 
Murphy, Kaine, Corker, Risch, Johnson, and McCain.

          OPENING STATEMENT OF HON. ROBERT MENENDEZ, 
                  U.S. SENATOR FROM NEW JERSEY

    The Chairman. Good morning. This hearing of the Senate 
Foreign Relations Committee will come to order. Today we are 
here to take a close look at and discuss United States policy 
toward Iran. Iran's provocative actions threaten not just 
regional stability, but pose an existential threat to our ally 
Israel and a threat to United States national security. Iran 
continues to export terrorist activity directly and through 
proxies like Hezbollah. It actively supports the Assad regime 
in Syria with fighters, arms, and petroleum, and its drive for 
nuclear weapons is unrelenting, placing Iran at the top of our 
list of national security concerns. In my view, it remains the 
paramount national security challenge we face, certainly in the 
Middle East, if not the world.
    I called this hearing today because we are now at a 
crossroads in our Iran policy and the question today is what do 
we do next. The Obama administration, in concert with Congress, 
has pursued the dual-track approach of diplomacy and sanctions. 
Last week members of the committee met with Lady Ashton, who 
has led the diplomatic track with the P5+1 along with Under 
Secretary Sherman. The talks have been central in demonstrating 
to the world that it is Iran and not the United States that is 
acting in bad faith and it is Iran that, through its 
obstinance, has helped galvanize the international community to 
increase the pressure.
    But the talks have failed to achieve their central 
objective, getting Iran to make concessions on the nuclear 
weapons program. It is clear to me that we cannot allow the 
Iranians to continue to drag their feet and buy time even as 
the centrifuges keep spinning.
    A nuclear-armed Iran is not an option, which is why I have 
been fully dedicated to do everything we can to stop Iran from 
ever crossing that threshold and why I introduced Senate 
Resolution 65 with Senator Graham that makes clear that a 
nuclear Iran is not an option and that the United States has 
Israel's back.
    In my view, it is necessary that we continue to apply 
pressure and that we must bring along the international 
community in our effort. Although Iran's crude oil exports have 
been cut in half from 2.5 million barrels per day in 2011 to 
approximately 1.25 million barrels per day now, Iran still had 
energy sector exports of exported $83 billion in 2012, 
including $60 billion in oil and another $23 billion in natural 
gas, fuel oil, and condensates.
    So while the sanctions are working, they are not enough and 
they are not working fast enough. At this moment we need to 
double down, I believe, on four fronts: First, we need to 
encourage further reductions in energy sector purchases from 
Iran, including purchases of petroleum, fuel oil, and 
condensates, and prevent Iran from engaging in trade in 
precious metals to circumvent the sanctions.
    Second, we need to ensure that we have prohibited trade 
with Iran with respect to all dual-use items that can be used 
in Iran's nuclear program. That means adding, for example, 
additional industry sectors to the trade prohibition list.
    Third, we need to ask the international community to ramp 
up the pressure and change Teheran's calculus. A nuclear Iran, 
after all, isn't only an American problem.
    And fourth, the time may have also come to look more 
seriously at all options, and that would include increasing 
military pressure against Iran.
    I believe there is still time for diplomacy to work, but 
increased military pressure could signal to the Supreme Leader 
that a nuclear program will undermine the security of his 
regime, not improve it. Fundamentally, the challenge remains a 
difficult one and we are walking a very fine line: How do we 
convince the Supreme Leader that his continued pursuit of 
nuclear weapons is threatening the very existence of his 
regime? How do we convince him that this is about his nuclear 
weapons program, not regime change?
    To help us understand the current state of affairs and 
explore ways to meet this national security challenge, we are 
joined today by Wendy Sherman, the Under Secretary of State for 
Political Affairs, and David Cohen, the Under Secretary of 
Treasury for Terrorism and Financial Intelligence. I want to 
thank you both for making the effort to be here today. We had 
originally--after this hearing we were going to continue in a 
classified setting, but because of about 7 to 10 votes that are 
going to be held, we, No. 1, appreciate that everybody 
accommodated their schedules to starting a half-hour earlier, 
and we will be unable at this point to do that classified 
hearing. We look forward to scheduling that at a future date.
    With that, let me turn to the distinguished ranking member, 
Senator Corker, for his comments.

             OPENING STATEMENT OF HON. BOB CORKER, 
                  U.S. SENATOR FROM TENNESSEE

    Senator Corker. Thank you, Mr. Chairman, and thanks for 
calling this hearing.
    Thanks to the two of you for being here. I know we have 
done this many times. I think you know we will be considering 
legislation a little bit later this year to deal potentially 
with additional sanctions and activities around Iran. One of 
the reasons is, in spite of the inflation, in spite of the 
issues that they are dealing with internally, there are still 
questions as to whether this is going to cause a behavior 
change with Iran, and so continued sanctions will be looked 
at--additional sanctions.
    I guess at some point we are going to have to make a 
determination as to when sanctions are having no effect and we 
have to move to some other kind of activity, and I think that 
is what the chairman is referring to when he says that we may 
soon be at a crossroads. The question is, Will Iran ever 
negotiate away their nuclear program? I think that is certainly 
highly questionable.
    So another question is, What does ``yes'' look like? I 
mean, if they were to negotiate with us on a nuclear program 
and we came to a good end there, how do we deal with Syria? How 
do we deal with the human rights piece? So I know that we will 
discuss that during this hearing. I appreciate you being here.
    I know that we do not really expect any changes within the 
country between now and June because an election is under way, 
but certainly would like to understand what you think may 
happen after that. I know a great deal of that depends upon who 
is elected.
    But thank you for being here today and I look forward to 
your testimony and the questions that come thereafter.
    The Chairman. Thank you, Senator Corker.
    With that, we welcome both of your testimonies, starting 
with Secretary Sherman. Your full statements will be included 
in the record and we ask you to synthesize that so we can get 
into a discussion.
    Madam Secretary.

STATEMENT OF HON. WENDY SHERMAN, UNDER SECRETARY FOR POLITICAL 
       AFFAIRS, U.S. DEPARTMENT OF STATE, WASHINGTON, DC

    Ms. Sherman. Thank you very much, Mr. Chairman, Ranking 
Member Corker, Senator Cardin, and other Senators who I am sure 
will join. Good morning and thank you for the invitation to 
testify along with my colleague about one of our top foreign 
policy and national security priorities, and that is, of 
course, Iran.
    Iran's leaders want the world to think of their country as 
a legitimate power and a regional leader. Yet the costly and 
destructive decisions the regime is making day after day 
undermine Iran as a credible player on the world stage. What's 
more, Iran's policies, from its nuclear weapons ambitions to 
its destabilizing regional activities to its abysmal record on 
human rights, create a range of challenges to the United States 
and every country committed to peace and stability.
    The Obama administration takes every single one of these 
challenges seriously. We know that our success depends on 
effective collaboration here in Washington and with our allies 
and partners around the world. We are pursuing a number of 
avenues to deal with Iran: resolutions and other actions at the 
United Nations, the Human Rights Council, the IAEA, and other 
multilateral organizations; wide-ranging sanctions; ensuring we 
have the appropriate force posture; leveraging bilateral 
relationships to raise a flag when Iran seeks to open up a new 
embassy; and engaging the Iranian people through virtual 
diplomacy.
    Every day, every Bureau in the Department of State, and I 
dare say in virtually every other Department in our Government, 
has their eye on Iran. We are making clear that Iran's 
international legitimacy and the end to their isolation depends 
on the choice Iran's leaders are facing right now: change 
course or continue to pay the cost of intransigence.
    Indeed, we meet here today when two very important things 
are taking place. High Representative Ashton, with whom you 
met, as you mentioned, Mr. Chairman, last week, will be meeting 
with Dr. Saeed Jalili in Istanbul for dinner to press forward 
in the negotiation track and the IAEA will be meeting with Iran 
today in Vienna to further discuss the structured approach to 
meeting the concerns of the international community. In 
addition, today the United Nations General Assembly will be 
debating Syria, where Iran is a very key and clearly 
destructive player.
    I would like to discuss a few specific details about the 
administration's policy toward Iran. Let me begin with Iran's 
nuclear program. From the start of his administration, 
President Obama has been clear: The United States will not 
allow a nuclear-armed Iran. He has also been clear that Iran's 
leaders have a choice: Live up to their international 
obligations and become a player on the global stage or continue 
down the path toward isolation and devastating results for its 
country.
    As Iran's leaders have continued to defy international 
consensus, we have put in place a dual-track policy of 
ratcheting up pressure in the form of sanctions and other 
measures, while pursuing a diplomatic option. The sanctions 
have hit the Iranian economy hard. Iran's crude exports have 
plummeted, costing Iran $3-to-$5 billion per month. The rial 
has depreciated more than 50 percent over the past few months 
and official inflation is 32.2 percent, although informal 
estimates are significantly higher.
    Even with sanctions in place, we are making sure that 
humanitarian trade continues so that the Iranian people are not 
facing impossible hardship. At the same time, we and our P5+1 
partners are pushing for a diplomatic solution. We have offered 
Iran the opportunity to reduce tensions and move toward a 
negotiated solution. Unfortunately, so far the Iranians have 
fallen far short with their response. As I mentioned, today in 
Istanbul the EU's, Lady Ashton, and Iran's nuclear negotiator, 
Saeed Jalili, are meeting, and we hope that Iran shows signs 
they are prepared to finally take these talks seriously.
    We are clear-eyed in our approach to the P5+1 talks and 
seek concrete results. After all, while the window for 
negotiation is still open, it will not remain so forever. We 
will give diplomacy every chance to succeed, but ultimately the 
onus is on Iran.
    Beyond Iran's nuclear ambitions, we are also concerned 
about the destabilizing influence Iran is casting across the 
entire Middle East and beyond--support to the Assad regime, 
their closest ally, sustaining the campaign of violence against 
the Syrian people; their aid to terrorist organizations is 
threatening our ally Israel and innocent civilians worldwide. 
That is why we are deepening our military partnerships across 
the region, particularly with Israel and the gulf, to defend 
against attacks from the very groups supported by Iran's 
leader.
    I will be just one more moment.
    I also want to reiterate our commitment to seeing the safe 
return of Robert Levinson, Saeed Abedini, and Amir Hekmati, 
Ameri- 
can citizens missing or detained in Iran. Today and every day 
in 
this country, families are wondering where their loved ones 
are, whether they are safe, and when they might come home. We 
are not going to back down until these Americans are safe and 
sound.
    And of course, we are deeply concerned about the campaign 
of repression Iran's rulers are waging against their own 
people: abuse of those who speak out against their government 
and harassment of their families; students, lawyers, 
journalists, bloggers facing endless intimidation, 
discrimination, and incarceration, desperate and vital voices, 
whether in a town square or on a Twitter feed, stifled and 
punished.
    Over nearly 5,000 years, Persian civilization has given the 
world innovations in culture, art, medicine, and government. 
But today the historic greatness has been set far back. The 
limitless potential of Iran's people has been stifled. As 
President Obama said in his Nowruz message, all nations would 
benefit from the talents and creativity of the Iranian people, 
especially its youth. Every day that Iran is isolated from the 
international community is a day that we are not working 
together, building together, sharing history, and learning 
about each other.
    Today the United States and Iranian national wrestling 
teams are facing off in Madison Square Garden, but, sadly, this 
show of healthy competition and good sportsmanship is a deep 
exception. Iranians are owed the rights, freedoms, and dignity 
we cherish here as the bedrocks of our Nation and that all 
people around the world deserve. So we are helping the Iranians 
break through the electric curtain, creating a virtual space 
for those voices that are suppressed and leveling sanctions to 
hold the individuals and organizations behind the repression 
accountable.
    I will finish by saying that we are closely watching the 
upcoming election. Four years ago, the Iranian people spoke out 
for human rights, basic dignity, and great opportunity. The 
regime responded by shooting demonstrators in the streets and 
frightening families in their homes, and today Iran's Guardian 
Council, unelected and unaccountable, is sorting through 
Presidential contenders, over 600 of them, eliminating 
literally hundreds of candidates.
    We take no sides in the election, but we know that the 
desires and aspirations of the Iranian people must start with 
free, fair, and transparent elections. As I said, we are clear-
eyed about the challenges that lie ahead dealing with the 
Iranian regime. Congress and this administration have stood 
side by side in dealing with this threat to our security and 
the security of our allies and to global stability. I'm 
confident that we can continue to work together on this very 
critical challenge.
    Thank you.
    [The prepared statement of Ms. Sherman follows:]

          Prepared Statement of Under Secretary Wendy Sherman

    Chairman Menendez, Ranking Member Corker, distinguished members of 
the committee, thank you for inviting me here today to discuss the 
administration's approach to the multiple challenges posed by Iran--by 
its nuclear ambitions, its support for international terrorism and 
destabilizing activities in the region, and its human rights abuses at 
home. I want to use this opportunity to speak clearly about these 
challenges; to lay out the multivectored strategy we are pursuing to 
counter them; and to be clear about the consequential choices ahead for 
America and our allies, but especially for Iran, its rulers, and its 
people.
                         the nuclear challenge
    Iran's nuclear activity--in violation of its international 
obligations and in defiance of the international community--is one of 
the greatest global concerns we face. A nuclear-armed Iran would pose a 
threat to the region, to the world, and to the future of the global 
nuclear proliferation regime. It would risk an arms race in a region 
already rife with violence and conflict. A nuclear weapon would 
embolden a regime that already spreads instability through its proxies 
and threatens chokepoints in the global economy. It would put the 
world's most dangerous weapons into the hands of leaders who speak 
openly about wiping one of our closest allies, the State of Israel, off 
the map. In confronting this challenge, our policy has been clear: we 
are determined to prevent Iran from acquiring a nuclear weapon. Our 
preference is to resolve this through diplomacy. However, as President 
Obama has stated unequivocally, we will not allow Iran to obtain a 
nuclear weapon, and there should be no doubt that the United States 
will use all elements of American power to achieve that objective.
    Iran's Supreme Leader Ayatollah Khamenei has asked why it is that 
the international community does not believe that Iran's nuclear 
program is for peaceful purposes only. The answer is simple: Iran has 
consistently concealed its nuclear activities and continues to do so, 
denying required access and information to the International Atomic 
Energy Agency. As a signatory to the Nuclear Non-Proliferation Treaty, 
Iran has responsibilities to the international community, and it is 
that blatant disregard for those responsibilities that has made Iran 
the subject of four U.N. Security Council resolutions imposing 
mandatory sanctions.
    From his very first months in office, President Obama put forward a 
clear choice to the Iranian Government: Meet your international 
responsibilities on your nuclear program and reap the benefits of being 
a full member of the international community, or face the prospect of 
further pressure and isolation. Unfortunately Iran has so far chosen 
isolation. There is still time for it to change course, but that time 
is not indefinite. I want to be clear that our policy is not aimed at 
regime change, but rather at changing the regime's behavior.
                         the dual-track policy
    Since this administration took office in 2009, we have pursued a 
dual-track policy. Working with the P5+1--the five members of the U.N. 
Security Council--China, France, Russia, the United Kingdom, and the 
United States, plus Germany, under the auspices of the European Union--
we have actively pursued a diplomatic solution to international 
concerns over Iran's nuclear program. As a result of Iran's continuing 
disregard for its international obligations, we have ratcheted up the 
pressure on the Iranian Government. We have built and led a global 
coalition to create the toughest, most comprehensive sanctions to date 
on the Iranian regime. The international community is united in its 
determination to prevent a nuclear-armed Iran.
    Today, Iran is isolated and sanctions are having a real impact on 
the ground, exacerbated by the regime's own mismanagement of its 
economy. Iran exports over 1 million fewer barrels of crude oil each 
day than it did in 2011, costing Iran between $3-$5 billion per month. 
All 20 importers of Iranian oil have either significantly reduced or 
eliminated oil purchases from Iran. Financial sanctions have crippled 
Iran's access to the international financial system and fueled the 
depreciation of the value of Iran's currency to less than half of what 
it was last year. Foreign direct investment into Iran has decreased 
dramatically as major oil companies and international firms as diverse 
as Ernst & Young, Daimler AG, Caterpillar, ENI, Total, and hundreds 
more have divested themselves from Iran. The International Monetary 
Fund projects the Iranian economy will contract in 2013, a significant 
decrease from the over 7-percent growth 6 years ago, and far below the 
performance of neighboring oil-exporting countries. Put simply, the 
Iranian economy is in a downward spiral, with no prospect for near-term 
relief.
    And we continue to increase the pressure. Iranian oil exports will 
continue to decline as we implement the law through our engagement with 
the last remaining six importers of Iranian oil. Iran's currency will 
remain volatile as we block Iran's revenue streams and block its access 
to funds held abroad. And we will continue to track, identify, and 
designate individuals and entities assisting Iran's proliferation 
efforts and attempting to evade sanctions on Iran. Last week, the State 
Department sanctioned four Iranian companies and one individual for 
providing the Iranian Government with goods, technology, and services 
that increase Iran's ability to enrich uranium, which is prohibited by 
U.N. Security Council resolutions. On March 14, the State and Treasury 
Departments imposed sanctions on Dr. Dimitris Cambis and his company 
Impire Shipping for operating vessels on behalf of the National Iranian 
Tanker Company (NITC) that disguised the Iranian origin of the crude 
oil. On July 1, the Iran Freedom and Counter-Proliferation Act of 2012 
takes full effect, targeting an array of sectors and industries in 
Iran. Looking forward, as long as Iran continues on its current 
unproductive path, the administration will continue to assess and 
implement potential additional sanctions on sectors and industries that 
can serve as pressure points. We look forward to continued strong 
collaboration with members of Congress to develop smart sanctions and 
increase pressure on the regime, while maintaining the strong coalition 
we have built through sustained diplomatic efforts with partners.
    In fact, one of the keys to our successful ratcheting up of the 
pressure on Iran is that we are not doing so alone. The European Union 
has enacted its own stringent sanctions regime, including an oil import 
ban that resulted in all 27 EU member states ceasing oil purchases from 
Iran. Australia, Canada, South Korea, Japan, and others have enacted 
their own sets of domestic measures, strengthening the international 
sanctions regime and sending a clear message to Iran: adhere to your 
international obligations, or face increasing pressure from the 
international community. And, even among partners who are frankly 
skeptical of sanctions, we have seen robust implementation of U.N. 
Security Council resolutions and cooperation on specific sanctions 
issues. We continue to coordinate closely with all of our international 
partners, ensuring stringent implementation of existing sanctions and 
encouraging strong domestic measures on Iran. As we move forward, it 
will be critical that we continue to move together and not take steps 
that undo the progress made so far. Doing such would signal divisions 
to Iran that it could, and likely would, exploit.
    Even as we significantly increase pressure on the Iranian regime, 
we remain committed to ensuring that legitimate, humanitarian trade can 
continue for the benefit of the Iranian people. We take no pleasure in 
any hardship our sanctions might cause the Iranian people in their 
everyday lives, and it is U.S. policy to not target Iranian imports of 
humanitarian items. We have worked hard to ensure U.S. regulations 
contain an explicit exception from sanctions for transactions for the 
sale of agricultural commodities, food, medicine, or medical devices to 
Iran as long as the transactions do not involve a designated entity or 
otherwise proscribed conduct. And when natural disasters have struck 
Iran, we have been ready to assist. Following a tragic earthquake in 
northwest Iran in August 2012, the administration issued a general 
license to facilitate U.S. support to the Iranian people as they 
responded to and rebuilt from the natural disaster. In all our efforts 
on Iran, we have demonstrated that supporting the Iranian people and 
pressuring the policies of their government are not mutually exclusive.
    As we have built unprecedented pressure on the Iranian regime, we 
have also intensified our efforts toward pursuing a diplomatic solution 
to the nuclear issue. Since his first days in office, the President has 
emphasized our readiness, working with members of the P5+1 to seek a 
negotiated resolution regarding Iran's nuclear program. The P5+1 has 
been incredibly unified, and we have worked closely and well with the 
Russians and Chinese. On February 26, 2013, the P5+1 met with Iranian 
representatives in Almaty, where the P5+1 jointly presented Iran with 
an updated, balanced proposal that offered Iran a real opportunity to 
take steps toward reducing tensions and creating the time and space to 
negotiate a comprehensive solution to the nuclear issue. As in prior 
talks, Iran was presented with a strong and united message: address the 
international's community's concerns or face mounting pressure. 
Interestingly, Iran's initial public response was positive and they 
signaled a potential turning point.
    Yet, when on April 5, 2013, the P5+1 returned to Almaty to hear 
Iran's formal response to our proposal, the Iranians once again fell 
short. While the P5+1 had a substantive exchange of views with Iran 
during the talks, in the end, Iran's counterproposal to the P5+1 
initiative was very disappointing. According to this counterproposal 
Iran would place little or no constraint on its current nuclear 
activities, while demanding that major sanctions be removed 
immediately. Given the significant gulf between the two sides, the P5+1 
members did not believe scheduling another round was warranted at that 
time, and instead agreed to return to capitals to discuss the latest 
developments with their respective governments. They agreed that EU 
High Representative Catherine Ashton would then follow up with Iran on 
next steps, and indeed Ashton and Iran's Chief Nuclear Negotiator Saeed 
Jalili are scheduled to meet in Istanbul today, May 15.
    We are looking for signs that Iran is prepared to move to address 
substantively all aspects of the proposal we discussed in Almaty. We 
are not interested in talks for talks' sake, but we must give diplomacy 
every chance to succeed. And, while we leave the door open to 
diplomacy, we will continue to maintain unrelenting and increasing 
pressure.
    We have approached these negotiations realistically, conscious of 
our difficult history. We continue to seek concrete results in our 
talks, not empty promises. The onus is on Iran.
                         support for terrorism
    Beyond its illicit nuclear activity, we also have grave concerns 
about Iran's destabilizing activities in the Middle East, particularly 
its support for Bashar Assad in Syria; its support for terrorist 
organizations like Hezbollah; and its unacceptable attacks on innocent 
civilians worldwide. These activities are not going unchecked.
    Iran is the world's foremost state sponsor of terrorism, which it 
uses as a strategic tool of its foreign policy. Led by the Islamic 
Revolutionary Guard Corps (IRGC)-Quds Force and the Ministry of 
Intelligence and Security (MOIS), the ``Iran Threat Network'' comprises 
an alliance of surrogates, proxies, and partners such as Hezbollah, 
HAMAS, and Iraqi Shia militants, among others. Iran funds, trains, and 
equips these terrorist organizations, in whole or in part, to use in 
attacks around the world. This clandestine threat network destabilizes 
countries throughout the Middle East and threatens regional security. 
Iran's leaders have aimed most of their threats at one of our closest 
allies, blatantly declaring their desire to see the destruction of the 
State of Israel. We have a moral obligation to ensure that Iran never 
has the tools to make good on that threat.
    Israel is not Iran's only target, however. Iranian national Mansour 
Arbabsiar pled guilty last year to plotting with members of the Quds 
Force to murder the Saudi Arabian Ambassador by bombing a crowded 
restaurant here in Washington, DC. The attempt to assassinate a foreign 
diplomat in our Nation's capital is an intolerable escalation of 
Iranian terrorist activity.
    Iran has also sponsored and directed terrorist attacks against 
Israeli civilian and diplomatic targets worldwide. On February 13, 
2012, a magnetic bomb was placed under the vehicle of an Israeli 
diplomat's wife in New Delhi, India, seriously injuring her and three 
Indian nationals. The following day, a similar device was discovered 
under a vehicle belonging to the Israeli Embassy in Tbilisi, Georgia, 
and safely defused. At the same time, Thai police arrested three 
Iranian nationals in Bangkok in connection with explosions at a private 
residence that subsequently revealed bombmaking materials and makeshift 
grenades intended for use in attacks against Israeli targets.
    In June 2012, Kenyan authorities arrested two Iranian members of 
the Quds Force. Armed with 33 pounds of military-grade plastic 
explosives, they planned deadly attacks on Western and Israeli targets. 
On May 6, a Kenyan court sentenced them to life imprisonment for 
terrorism-related offenses.
    Lebanese Hezbollah continues to be a key partner and substantial 
part of Iran's threat network. Iran provides hundreds of millions of 
dollars to Hezbollah annually and has long been Hezbollah's primary 
trainer and arms supplier. Hezbollah and the Iranian leadership share a 
worldview and strategic vision and are seeking to exploit the current 
unrest in the Middle East and North Africa to their advantage. We 
remain focused on Hezbollah activity worldwide, and have devoted a 
great deal of diplomatic effort over the past several years to raising 
awareness of Hezbollah activity with European partners, well before 
last summer's attack in Bulgaria, in which six Israeli tourists were 
killed in a terrorist bombing, and arrest in Cyprus of a suspected 
Hezbollah operative.
    Thwarted attacks involving Iranians and Iranian proxies like 
Hezbollah in Cyprus, Thailand, and Kenya--to name a few examples--show 
a clear willingness on the part of our international partners to target 
and prosecute Iranian terrorist activity. As evidenced by these 
disruption and prosecution efforts across Africa, East Asia, and 
Europe, we and our international partners have become increasingly 
effective at targeting Iranian support for terrorism.
                regional meddling and support for assad
    In Syria, Iran has made it clear that it fears losing its closest 
ally and will stop at no cost, borne by both the Syrian and Iranian 
people, to prop up the Assad regime. Today, Iran is training, arming, 
funding, aiding and abetting the Assad regime and its atrocious 
crackdown on its own people. It is coordinating its intervention in 
Syria with Hezbollah, which is itself engaged in training proregime 
militants who attack Syrian civilians, and in direct fighting on behalf 
of the Assad regime against the Syrian people. Iran and Hezbollah 
fighters are also directing the activities of Iraqi militia groups 
which have been enlisted to join in the Assad regime's war against the 
Syrian people. Iran has shown that it is willing to potentially 
destabilize an entire region if it means keeping the Syrian regime as 
an ally. Countering such efforts remains a key priority for the 
administration and we are focused on preventing Iran from continuing to 
support the Syrian regime financially, materially, and logistically. 
The administration has used its authorities in several Executive orders 
to highlight the role of Iran in the Syrian regime's violation of human 
rights and hold accountable those responsible.
    These facts further highlight Iran's continued efforts to expand 
its nefarious interference in the region. In January, Yemeni 
authorities seized, in Yemeni territorial waters, a 40-ton Iranian 
shipment of weapons and explosives destined for Iranian-supported Huthi 
extremists. These activities interfere with Yemen's ongoing political 
transition, and are destabilizing to the wider region. It is no 
surprise then that, according to a 2013 Zogby survey of 20 Arab and 
Muslim-majority countries, Iran is now viewed unfavorably in a majority 
of Arab countries and its appeal to mainstream Arab public opinion has 
virtually collapsed from its 2006 peak.
    As Iran's isolation grows, we are working through existing regional 
counterterrorism partnerships to address the Iranian threat, and the 
interdiction in Yemen is a successful example of that cooperation. We 
are also deepening our military partnerships across the region. We 
consult regularly on security matters with our partners in the Persian 
Gulf and maintain a substantial presence in the region, to keep a 
watchful eye on Iran, counter potential Iranian aggression, reassure 
our allies, and protect the free flow of commerce through the Strait of 
Hormuz. We are also in close and constant contact with Israel to 
coordinate our policies and have taken unprecedented steps to protect 
Israel's Qualitative Military Edge--including support for the Iron Dome 
defense system to stop Iranian-supported militant groups from firing 
Iranian-supplied rockets into Israeli communities.
                  levinson, abedini, and hekmati cases
    Just as we are concerned about Iran's destabilizing regional 
activities abroad, we remain concerned about Iran's treatment of U.S. 
citizens detained and missing in Iran. The U.S. Government is dedicated 
to the return of American citizen, Robert Levinson, and U.S.-Iranian 
dual nationals Saeed Abedini and Amir Hekmati. Mr. Levinson went 
missing from Kish Island, Iran, on March 9, 2007, and his whereabouts 
remain unknown. We continue to call on the Iranian Government to make 
good on its promises to assist the U.S. Government in finding Mr. 
Levinson so that he can be reunited with his family. Mr. Hekmati, a 
former U.S. Marine who served in Afghanistan, was detained in Iran 
since August 2011, and endured a closed-door trial with little regard 
for fairness or transparency. Mr. Abedini has been detained in Iran 
since September 2012 on charges related to his religious beliefs, and 
reportedly has suffered physical abuse by Iranian officials in prison. 
Despite our repeated requests, Iranian authorities have failed to 
provide them with adequate medical treatment or permit visits from our 
protecting power. We will continue to raise these cases directly and 
publicly as we also pursue all available options until all three of 
these Americans return home safely.
                              human rights
    We are equally disturbed by the regime's ongoing campaign of 
repression against its own people. Such oppression has included the 
harassment and intimidation of family members of those who speak out 
for freedoms, the torture of political prisoners, and the limitation of 
freedom of expression and access to information. These acts of 
aggression have created a culture of fear in which few dare to voice 
dissent or challenge regime officials. Students, lawyers, journalists, 
and bloggers, ethnic and religious minorities, artists and human rights 
activists are all targets for abuse, intimidation, or discrimination.
    Labeled by press advocacy group Reporters Without Borders as an 
``enemy of the Internet,'' Iran filters online content and blocks 
access to the Internet to prevent Iranian people from acquiring 
knowledge and unbiased information about their own country and the 
outside world. We are committed to raise the cost of repression and 
help Iranians break through the ``electronic curtain'' the regime is 
erecting to communicate with one another and share their story with the 
world.
    As Dr. Martin Luther King said, ``Injustice anywhere is a threat to 
justice everywhere,'' and this is true, too, as we advocate for the 
rights and freedoms of the Iranian people. We have helped raise 
awareness of regime abuses and held Iranian officials responsible for 
their actions. Working with the authorities you provided us, we have 
imposed sanctions--including asset freezes and visa bans--on 30 Iranian 
individuals and entities for engaging in serious human rights abuses or 
censorship activities that limit freedom of expression, including the 
IRGC, the MOIS, Iran's Cyber Police, and the Islamic Republic of Iran 
Broadcasting. And while we know that public discussion of these 
incidents does not always help the people taking risks on the ground, 
make no mistake: we have stood--and will continue to stand--fully and 
firmly behind the aspirations of the Iranian people.
    We have lent our voice to those the regime has tried to silence, 
speaking out in defense of numerous political prisoners, such as noted 
human rights defender Nasrin Sotoudeh, Christian pastor Youcef 
Nadarkhani, journalist Zhila Bani-Yaghoub, and Kurdish rights activist 
Seddigh Kaboudvand. We will continue to highlight such cases and 
coordinate our actions with our international partners, as we did in 
2011 at the U.N. Human Rights Council to create the mandate of the 
Special Rapporteur for Human Rights in Iran, whose exhaustive reports 
have detailed the extent of unspeakable abuses in Iran. Likewise, we 
will continue to support the annual Canadian-led resolution at the U.N. 
General Assembly to condemn Iran's human rights practices, a measure 
which has passed for 10 consecutive years.
                     outreach to the iranian people
    Coupled with our concerns about human rights are our concerns about 
the well-being of the Iranian people. Every day, we hear from the 
Iranian people directly through our public diplomacy programs and 
Farsi-language social media platforms. The Virtual Embassy Tehran, 
launched in December 2011, has over 2 million hits and our Farsi-
language Facebook, Twitter, Google+, and YouTube channel have also been 
enormously successful. The 170 videos on our YouTube channel have more 
than 1 million views and our Facebook page has over 120,000 fans, 60 
percent of whom are inside of Iran and who access our sites even though 
the Iranian regime blocks the site.
    What we see through our interactions is that the Iranian people are 
being detrimentally affected by the misplaced priorities, corruption, 
and mismanagement of their government. Instead of meeting the needs of 
its own people, the Iranian regime has chosen to spend enormous amounts 
of its money and resources to support the Assad regime as well as its 
militant proxies around the world, and to pursue the development of 
weapons of mass destruction. Instead of investing in its people, Iran 
continues to restrain their vast potential through censorship, 
oppression, and severe limitations on their social, political and even 
academic freedoms.
    As the President and the Secretary have said, in the United States 
our own communities have been enhanced by the contributions of Iranian 
Americans. We know that the Iranian people come from a great 
civilization whose accomplishments have earned the respect of the 
world. That is why in his 2013 Nowruz message, the President emphasized 
that there is no good reason for Iranians to be denied the 
opportunities enjoyed by people in other countries.
    Iranians deserve the same freedoms and rights as people everywhere 
and all nations would benefit from the talents and creativity of the 
Iranian people, especially its youth. It is a shame that much of the 
world realizes this and the Iranian Government has yet to do so.
                         presidential elections
    Let me conclude by addressing a topic we are watching closely: 
Iran's June 14 Presidential election. Following the last election in 
2009, when the regime violently quashed the hopes and dreams of 
ordinary Iranians who went into the street to demand their fundamental 
rights, we have seen a deliberate and unrelenting level of repression 
in the lead-up to these elections.
    As we speak, behind closed doors, Iran's unelected and 
unaccountable Guardian Council is vetting Iranian Presidential 
contenders, using vague criteria to eliminate potential candidates. 
Without a transparent process, it is difficult for us to say whether 
Iran's elections will be free, fair, or represent the will of the 
Iranian people.
    We take no sides in Iran's Presidential election. The decision 
about who leads Iran is for the Iranian people, who should have every 
opportunity to express freely and openly their opinions, ideas, and 
hopes for the future of their country. But we do call on the Iranian 
authorities to conduct a free and fair election that not only conforms 
to international standards of transparency and accountability but is 
just and represents the will of the Iranian people.
                               conclusion
    In sum, Iranians deserve better. Their government has chosen to 
isolate them, stunt their economic growth, repress their ability to 
speak freely, and connect the people of Iran with the most heinous acts 
of terrorism and regional adventurism. Iran's Government can choose to 
end these policies at any time and put their people's well-being first.
    As the President said, we have no illusions about the difficulty of 
overcoming decades of mistrust. It will take a serious and sustained 
effort to resolve the many differences between Iran and the United 
States. We do not expect to always agree, but rather for Iran to be an 
honest and responsible member of the international community, a 
community where members honor their commitments and keep their word or 
pay the price.
    We share Congress' concern about Iran and want to continue our 
hand-in-hand efforts to ensure that Iran does not continue on a path 
that threatens the peace and stability of the region and tramples the 
freedoms of its citizens. We welcome your ideas on how we can sustain 
and expand our efforts.

    The Chairman. Thank you.
    Secretary Cohen.

STATEMENT OF HON. DAVID S. COHEN, UNDER SECRETARY FOR TERRORISM 
 AND FINANCIAL INTELLIGENCE, U.S. DEPARTMENT OF THE TREASURY, 
                         WASHINGTON, DC

    Mr. Cohen. Chairman Menendez, Ranking Member Corker, 
distinguished members of the committee, thank you for the 
opportunity to testify today.
    No issue is of greater concern or urgency than preventing 
Iran from obtaining a nuclear weapon. As my colleague Under 
Secretary Sherman has said, that is why this administration, 
from our first days in office, has pursued a dual-track 
strategy that offers Iran the opportunity for diplomatic 
engagement while at the same time making abundantly clear that 
if Iran continues to refuse to comply with its international 
obligations we along with our partners in the international 
community will apply increasingly powerful sanctions on Iran. 
That is exactly what we have done and that is what we are 
committed to continue to do, in close collaboration with 
Congress, so long as Iran refuses to engage meaningfully with 
respect to its nuclear program.
    In my written testimony, I describe in detail the expanding 
scope, intensity, and impact of our sanctions on Iran and how 
these new authorities, coupled with robust implementation and 
enforcement, have had a very significant impact on Iran. I 
would like to highlight just a few points.
    First and most importantly, creating this powerful 
sanctions regime has been, and must continue to be, a joint 
effort between the Congress and the administration. Through the 
enactment and energetic implementation of key pieces of 
legislation, including CISADA and the NDAA, we have isolated 
Iran from the international financial system and driven down 
Iran's oil exports by some 50 percent, depriving Iran of a 
critical source of revenue.
    In addition, to enhance the sanctions pressure on Iran, 
over the past year the President has adopted five Executive 
orders that extend and strengthen the legislative sanctions 
framework, including orders that block the property of the 
entire Government of Iran, including its central bank, that 
make dealings with the National Iran Oil Company and its 
trading arm, NICO, subject to sanctions, and that enhance the 
NDAA by authorizing sanctions on foreign banks that facilitate 
the acquisition from any party of Iranian petroleum, petroleum 
products, or petrochemicals.
    A few months ago the Iran Threat Reduction Act went into 
effect, which effectively locks up Iran's oil revenues in the 
few countries that still buy Iranian oil by requiring that that 
revenue can only be used to pay for bilateral trade or for 
humanitarian imports. As of February 6 of this year, Iran's 
dwindling oil revenue cannot be repatriated to Iran, 
transferred to a third country, or used to facilitate third-
country nonhumanitarian trade.
    Second, we have aggressively implemented and enforced the 
entire sanctions framework. Since the beginning of 2012 we have 
imposed sanctions on 22 individuals and 54 entities and added 
almost 200 aircraft and vessels to the sanctions list. We have 
imposed sanctions on banks, businesses, government entities, 
and individuals involved in Iran's WMD proliferation 
activities, its support for international terrorism, and its 
support for the brutal Assad regime.
    We have also targeted Iran's increasingly desperate efforts 
to evade our sanctions. In the last few months, we have imposed 
sanctions on Babak Zanjani and Dimitris Cambis, along with 
their front companies, ships, and banks, for engineering 
elaborate schemes to evade our sanctions. And just this morning 
we imposed sanctions on an exchange house and a trading firm in 
the UAE for providing services to designated Iranian banks, 
taking direct aim at a growing mechanism of sanctions evasion, 
nonbank financial institutions.
    Third, we see clear evidence that these efforts are having 
an impact. As I noted, Iran's crude oil and condensate exports 
have dropped by roughly 50 percent or some 1.3 million barrels 
per day between January 2012 and early 2013, costing Iran 
between $3 and $5 billion per month. In 2012 Iran's GDP fell by 
some 5-to-8 percent, the largest drop since 1988, the final 
year of the Iran-Iraq war and the first contraction in 20 
years. The value of Iran's currency--the rial--has plummeted, 
losing over two-thirds of its value in the last 2 years.
    We also see the impact of sanctions in less tangible, yet 
more significant, ways. During the negotiating sessions in 
Almaty, the Iranian side sought sanctions relief in exchange 
for concessions on their nuclear program. They would not have 
done so had the impact of sanctions not affected their 
calculus.
    Finally, we are committed to doing more. We will work to 
increase Iran's economic and financial isolation through the 
implementation as of July 1 of the Iran Freedom and 
Counterproliferation Act of 2012. We will work to target 
additional sources of Iranian revenue, including the 
petrochemical sector. With our colleagues at State, we will 
maintain our robust outreach efforts with foreign governments 
and the private sector to explain our sanctions, to warn of the 
risks of doing business with Iran, and to encourage them to 
take complementary steps.
    We will continue aggressively to implement and target 
Iran's proliferation networks, support for terrorism, sanctions 
evasion, abuse of human rights, and complicit financial 
institutions. And we will continue to work closely with 
Congress in each and every one of these endeavors, because we 
know that we share a common objective, ensuring that Iran does 
not obtain a nuclear weapon.
    I am happy to answer any questions you may have.
    [The prepared statement of Mr. Cohen follows:]

          Prepared Statement of Under Secretary David S. Cohen

                              introduction
    Chairman Menendez, Ranking Member Corker, and distinguished members 
of the committee, thank you for the opportunity to testify today on the 
Treasury Department's application of sanctions pressure as one part of 
the U.S. Government's effort, coordinated with counterparts around the 
world, to counter the threat posed by Iran's nuclear and ballistic 
missile program. Our continued close collaboration with this committee 
and your colleagues in Congress is essential to our success in 
addressing this threat.
    As this committee will appreciate, no issue is of greater concern 
or urgency than preventing Iran from obtaining a nuclear weapon. As the 
President recently warned, an Iran in possession of such a weapon would 
increase the risk of nuclear terrorism, undermine the global 
nonproliferation regime, trigger an arms race in the Middle East, and 
embolden a regime that has ruthlessly repressed its citizens.
    That is why this administration, from its first days in office, has 
tenaciously pursued a dual-track strategy that offers Iran a path to 
reclaim its place among the community of nations while making clear 
that we, along with our partners in the international community, would 
apply increasingly powerful and sophisticated sanctions on Iran if it 
continues to refuse to satisfy its international obligations with 
respect to its nuclear program. As we have repeatedly made clear, 
Tehran faces a choice: it can address the call of the international 
community to give up its nuclear ambitions and begin reintegrating 
itself diplomatically, economically, and financially into the world 
community, or it can continue down its current path and face ever-
growing isolation.
                      increasing pressure on iran
    Since my last appearance before this committee, the scope, 
intensity, and impact of U.S. sanctions on Iran have expanded through 
the enactment of legislation, the adoption of Executive orders, and the 
energetic implementation and enforcement of the entire sanctions 
framework. These efforts have heightened the economic pressure and 
imposed a very significant strain on the Iranian regime.
Designating Iranian Banks and Their Financial Partners
    When I last appeared before the committee, I described the 
administration's extensive efforts to implement the Comprehensive Iran 
Sanctions, Accountability, and Divestment Act of 2010 (CISADA). CISADA 
calls for the exclusion from the U.S. financial system any foreign 
financial institution that knowingly facilitates significant 
transactions or provides significant financial services for Iranian 
financial institutions designated in connection with Iran's nuclear or 
missile proliferation activity, or its support for international 
terrorism.
    The mere fact that we have CISADA at our disposal has been 
sufficient to drive the overwhelming majority of banks away from 
business with Iran's designated banks, isolating those Iranian banks 
from the global financial system. To date we have employed this 
authority against two foreign banks, China's Bank of Kunlun and Iraq's 
Elaf Islamic Bank, for facilitating millions of dollars' worth of 
transactions for several designated Iranian banks. Were there any 
question about our willingness to apply CISADA sanctions, these actions 
clearly demonstrated that we will target sanctionable activity, 
wherever it may occur.
Targeting the Central Bank of Iran and Iran's Oil Revenues
    Just over a year later, in December 2011, the President signed into 
law the National Defense Authorization Act for Fiscal Year 2012 (NDAA), 
which threatens CISADA-like consequences--that is, terminating or 
restricting correspondent account access to the U.S.--for foreign 
financial institutions that transact with the Central Bank of Iran 
(CBI) in a way not authorized by U.S. law. Significantly, the NDAA also 
marked a new phase in our sanctions campaign by targeting Iran's 
economic lifeblood: its oil exports.
    The logic behind the measures in the NDAA is twofold. First, it 
seeks to isolate the CBI from the international financial system--a 
step begun a month earlier when we designated the entire jurisdiction 
of Iran as a ``primary money laundering concern'' under Section 311 of 
the USA PATRIOT Act. These actions undercut the CBI's ability to 
facilitate the conduct of designated Iranian banks and to support 
Iran's illicit activities within Iran and abroad.
    Second, because the CBI is the primary bank into which Iran 
receives oil payments, the NDAA intensifies economic pressure on the 
regime. To prevent Iran from benefiting from a spike in oil prices that 
might be caused by a rapid reduction of Iranian oil in the market, the 
NDAA was designed to encourage Iran's oil customers to undertake 
significant but incremental reductions in their Iranian oil imports, 
giving customers and alternative suppliers a measure of time to adjust 
and accommodate this reduction. This law--working in tandem with our 
efforts targeting Iran's access to the international financial system--
has had an enormous impact on Iran's oil revenues.
Locking Up Iran's Oil Revenues
    The impact of the NDAA was further enhanced by a powerful measure 
contained in the Iran Threat Reduction and Syria Human Rights Act of 
2012 (TRA) that entered into effect on February 6, 2013. Under Section 
504 of the TRA, any country that has received an NDAA ``significant 
reduction'' exception--meaning that its banks can pay Iran for its 
significantly reduced oil imports without risk of correspondent account 
sanctions--must now ensure that those revenues are used only to 
facilitate bilateral trade or humanitarian trade. Iranian oil-import 
revenue cannot be repatriated to Iran, transferred to a third country, 
or used to facilitate third-country trade, except for humanitarian 
purchases. This is a very powerful provision, as it effectively ``locks 
up'' Iranian revenues in the few countries that still buy Iranian oil 
and denies Iran the free use of its diminishing oil revenue.
Tightening the Sanctions Regime Through Executive Orders
    To further enhance the pressure on Iran, the President in 2012 
issued five Executive orders targeting Iranian activity. I would like 
to highlight two in particular, that we have used to target Iran's 
efforts at sanctions evasion and to put further pressure on its energy 
exports.
    In response to Iran's continued abuse of the financial sector, the 
President in February 2012 issued Executive Order (E.O.) 13599. Among 
other things, E.O. 13599 blocks all property of the Government of Iran, 
including the Central Bank of Iran, and allows us to impose sanctions 
on any person--Iranian or non-Iranian--who acts for or on behalf of the 
Iranian Government, regardless of the type of activity. Under this 
Executive order we imposed sanctions on a Greek businessman, Dmitris 
Cambis, and a group of front companies for using funds supplied by the 
Government of Iran to purchase oil tankers, and then disguising the 
origin of the Iranian oil transported on those vessels.
    In July 2012, the President issued E.O. 13622, which enhances the 
NDAA by authorizing sanctions on foreign banks and persons that 
facilitate the activities of, or provide material support to, the 
National Iranian Oil Company (NIOC) or its energy-trading subsidiary, 
the Naftiran Intertrade Company (NICO), or that facilitate the 
acquisition--from any party--of Iranian petroleum, petroleum products, 
or petrochemicals. This authority also gives us the ability to target 
those who provide material support to the Central Bank of Iran or who 
sell gold to the Government of Iran. We have used this measure to 
important effect in our engagement with foreign partners, warning 
countries about the risk of undertaking this conduct and, we believe, 
deterring it.
Expanding Energy, Shipping, and Shipbuilding Sanctions
    Last, I would like to discuss a new authority, the Iran Freedom and 
Counter-Proliferation Act of 2012 (IFCA), which was enacted in January 
2013 and becomes fully effective on July 1, 2013. IFCA expands our 
existing sanctions by giving us new tools to target Iran's ports, 
energy, shipping, and shipbuilding sectors, as well as Iran's supply of 
certain metals and industrial materials. It also provides for 
additional sanctions on banks that transact with any designated Iranian 
entity, not just those designated for WMD proliferation, terrorism, or 
human rights abuses. To help ensure this new legislation has the 
greatest impact possible, we have conducted extensive outreach to 
foreign governments and companies to explain the ever-increasing risks 
that business, and financial transactions incident to that business, 
with Iran poses.
                     recent administration actions
    The pressure we have brought to bear on Iran is the result not only 
of the creation of additional authorities, but also the aggressive 
implementation of those authorities. Since the beginning of 2012, 
Treasury, in consultation with our interagency partners, particularly 
the Department of State, has imposed sanctions on 22 individuals and 54 
entities, and has added almost 200 aircraft and ships to the sanctions 
list. I will briefly describe a few recent actions emblematic of our 
work to expose Iran's WMD proliferation activities, its sponsorship of 
international terrorism, its support to the brutal Assad regime, and 
its abuse of human rights.
WMD Proliferation
    Disrupting and disabling Iran's WMD procurement networks and 
proliferation activities through the use of the counterproliferation 
Executive Order, E.O. 13382, remains one of our primary objectives. 
Last week, for example, we designated an Iranian financial 
institution--the Iranian Venezuelan Bi-National Bank--as engaging in 
financial transactions on behalf of a previously designated Iranian 
bank. That brings to 28 the number of Iranian financial institutions 
that have been designated under either E.O. 13382 or the 
counterterrorism Executive Order, E.O. 13224. Notably, each of these 
designated Iranian-linked financial institutions can trigger CISADA 
sanctions, meaning that any foreign financial institution that 
knowingly facilitates significant transactions for any of these 28 
financial institutions risks losing its access to the U.S. financial 
system.
    This action follows the designations of some 15 entities in 
November and December of last year that targeted the international 
procurement operations of Iran's Atomic Energy Organization of Iran 
(AEOI), the Iran Centrifuge Technology Company (TESA), and Iran's 
uranium enrichment efforts. Actions taken under E.O. 13382 build upon 
the hundreds of Iran-related designations we have made under this 
authority over the past 8 years.
Terrorism
    As we focus on Iran's WMD programs, we remain mindful that Iran is 
still the world's foremost state sponsor of international terrorism, in 
particular through its Islamic Revolutionary Guard Corps-Quds Force 
(IRGC-QF). Iran continues to provide financial and military support to 
several terrorist organizations, including Lebanese Hezbollah, which is 
responsible for the bombing last summer of a tourist bus in Burgas, 
Bulgaria.
    In November 2012 we exposed a senior IRGC-QF officer and senior 
official of the Iraqi terrorist group Kata'ib Hezbollah (KH), which is 
backed by the IRGC-QF and whose training has been coordinated with 
Lebanese Hezbollah in Iran. KH is responsible for a rocket attack that 
killed two U.N. workers in Baghdad and for numerous other acts of 
violence in Iraq. Treasury also maintains vigilant watch over the 
activities of al-Qaeda operatives working out of Iran in an effort to 
expose and isolate them. In October 2012, for example, we designated a 
key facilitator for 
al-Qaeda, the latest in a series of actions exposing some half a dozen 
members of 
al-Qaeda operating in Iran, under an agreement between Iran and al-
Qaeda.
Syria
    Iran's financial, material, and logistical support for the Assad 
regime's brutal campaign of violence against its own citizens also 
remains an area of intensive focus. Last year the President exposed the 
IRGC-QF for its support to the Syrian General Intelligence 
Directorate--a key instrument of Assad's repression--in the Annex to 
E.O. 13572, which targets those responsible for human rights abuses in 
Syria. We have also taken action under this authority against the IRGC-
QF's commander Qasem Soleimani and his deputy, as well as the Iranian 
Ministry of Intelligence and Security, Iran's primary intelligence 
organization. As part of the effort to expose Iran's role in abetting 
Assad's atrocities, Treasury has also targeted Iran's national police, 
the Law Enforcement Forces, along with its chief, Ismail Ahmadi 
Moghadam and his deputy, which have also aided the Syrian regime's 
crackdown.
    Iran's support to the Assad regime also is clearly reflected in 
Hezbollah's aid to the Assad regime. As we observed last year when we 
designated Hezbollah and its leadership for providing support to the 
Government of Syria under E.O. 13582, Iran has long provided Hezbollah 
with military, financial, and organizational assistance. Iran's IRGC-QF 
has led these efforts, working with Hezbollah to train Syrian 
Government forces and establish and equip a pro-Assad militia in Syria 
that has filled critical gaps in Syria's military.
    We also continue to focus on Syria and Iran's ongoing proliferation 
activities. Last year, for instance, we sanctioned Iran's SAD Import 
Export Company under E.O. 13382 for acting on behalf of Iran's Defense 
Industries Organization, itself sanctioned under this authority, for 
shipping arms to the Syrian military and supplying goods for the 
production of mortars.
Human Rights
    The people of Syria are only the latest to suffer from Iran's 
wanton disregard for human rights. Its own citizens, as we have 
witnessed for decades, continue to bear the brunt of the regime's 
abuses. Under E.O. 13553, Treasury and State have the authority to 
sanction Iranian officials who are responsible for, or complicit in, 
serious human rights abuses against the people of Iran on or after June 
12, 2009. This Executive order complements other authorities in CISADA, 
the TRA, and EO 13628 that target persons who transfer goods or 
technology likely to be used in serious human rights abuses or that 
have engaged in censorship activities against the people of Iran.
    Under E.O. 13628, we recently sanctioned the Islamic Republic of 
Iran Broadcasting and its managing director, the Iranian Cyber Police, 
and nearly a dozen other entities and individuals for their involvement 
in abusing the human and democratic rights of Iran's citizens. We 
continue to keep close watch on events in Iran, especially as the 
upcoming Presidential elections draw near, and will not hesitate to 
expose those who deny the Iranian people their democratic and human 
rights.
Sanctions Evasion
    As Iran is turned away from reputable international financial 
institutions and partners, it increasingly relies on deception and 
concealment to evade international sanctions to meet its financial 
needs. We have worked tirelessly to expose those who aid these efforts. 
In May 2012 the President issued E.O. 13608, which allows us to target 
those who facilitate Iran's evasion of sanctions. And last month under 
our WMD proliferation authority E.O. 13382, the administration exposed 
a major network run by Iranian businessman Babak Zanjani, including 
banks in Malaysia and Tajikistan, that helped move billions of dollars 
on behalf of the Iranian regime, including tens of millions of dollars 
to an IRGC company.
                            impacts on iran
    The international sanctions regime--of which our sanctions are just 
one, albeit very important, part--has had a significant effect on key 
sectors of the Iranian economy, as well as on the Iranian economy as a 
whole. More importantly, these economic effects have had an impact on 
Iran's leadership. Perhaps the clearest evidence of this comes from the 
recent negotiating sessions in Almaty, Kazakhstan. During those 
meetings, the Iranian side sought sanctions relief in exchange for 
concessions on their nuclear program. They would not have done so had 
the impact of sanctions not affected their calculus.
Petroleum Sector Impacts
    U.S. and EU sanctions on Iran's petroleum sector have been 
particularly powerful. Of the more than 20 countries that imported oil 
when the NDAA went into full effect on June 30, 2012, only a handful 
continue to do so today. Iran's crude oil and condensate exports have 
dropped by roughly 1.3 million barrels per day, or some 50 percent, 
between the enactment of the NDAA and early 2013. The EU's decision to 
ban the import of oil into Europe, effective in mid-2012, contributed 
in no small part to this fall. These lost sales cost Iran between $3 
billion and $5 billion a month. Iran's petrochemical exports have also 
been hit, decreasing by at least 7.6 percent in 2012 from the previous 
year.
Shipping Sector Impacts
    As our authorities have expanded to encompass Iran's petroleum 
sector, we have also used them to target Iran's ability to export its 
primary commodity. Under E.O. 13599, we sanctioned Iran's primary crude 
shipper, the National Iranian Tanker Company (NITC), over two dozen of 
its affiliates and over 60 of its vessels. Like the Islamic Republic of 
Iran Shipping Lines (IRISL), which our sanctions have largely driven 
out of business, NITC has sought to deceive the world maritime 
community, by changing the names of its vessels, turning off its 
transponders and engaging in ship-to-ship transfers to obscure the 
origin of Iranian oil. While these evasion efforts may work for a short 
while, they are not sustainable and are eventually detected, as last 
week's action against the Cambis network's Sambouk Shipping FZC clearly 
demonstrates.
Economic Impacts
    As Iran finds it increasingly difficult to earn revenue from 
petroleum sales and to conduct international financial transactions, 
Iran's economy has been severely weakened. Iran's own economic 
mismanagement has only exacerbated these effects.
    Take, for instance, the broadest measure of Iran's economic 
activity, its gross domestic product (GDP). Treasury assesses that in 
2012 Iran's GDP fell by some 5 to 8 percent--the largest drop since 
1988, the final year of the Iran-Iraq war, and the first contraction in 
20 years. This decline has impacted the Government of Iran's budget, 
causing it to run in 2012 its largest deficit in 14 years, which could 
amount to some 3 percent of GDP. We believe Iran's GDP will continue to 
shrink in 2013 in the face of reduced government and consumer spending 
and declining oil exports, as well as the ramping up of additional 
sanctions.
    Iran's economic contraction is manifest in its recent budget bill, 
which projects almost 40 percent less oil revenue than did the previous 
year's budget law. To help make up the shortfall, Iran's Parliament is 
currently considering tax increases of some 38 percent. And in March, 
Iran's Supreme Audit Court released figures showing that for the first 
9 months of the Iranian year only 53 percent of projected budget 
revenues had been realized.
    We have also begun to see the impact of the bilateral trade 
restriction in Section 504 of the TRA, which went into effect in 
February. This measure has limited Iran's access to its foreign 
exchange reserves and impeded the Government of Iran's ability to 
support the rial. Supported by our extensive outreach efforts, this 
powerful provision is rendering Iran's reserves increasingly 
inaccessible.
    Iran's currency also has been hit hard. At the beginning of 2012, 
one U.S. dollar purchased 16,000 rials in the open market. As of April 
30 of this year, one dollar was worth about 36,000 rials. (See Chart 
1.) The open market value of the rial has lost over two-thirds of its 
value in the last 2 years.




    Faced with a rapidly depreciating rial, in September 2012 the 
Central Bank of Iran established a Currency Trading Center (CTC) to 
allocate foreign exchange for certain preferred imports at a 
preferential rate of about 24,000 rials to the dollar. Apparently faced 
with dwindling supplies of hard currency, just a few weeks ago the CBI 
substantially limited the list of imported goods that qualified for the 
CTC's preferential rate.
    Inflation, partly due to the volatility and depreciation of the 
rial, is another telling metric. As of April 20, 2013, the official 
Statistics Center of Iran 12-month average inflation rate was 
approximately 30 percent, while the point-to-point inflation rate was 
nearly 39 percent. Independent analysis suggests the actual inflation 
rate is significantly higher.
    These figures become increasingly stark when we compare Iran to its 
neighbors or similarly situated countries. Compared to groupings of 
countries in the Middle East and Africa, Iran's stock of foreign 
capital, as measured by the Bank of International Settlements, is down 
57 percent for the 2-year period ending December 2012, representing a 
reduction in lending of some $9.5 billion. This figure contrasts with a 
13-percent increase in BIS banks' lending exposure to all developing 
countries. (See Chart 2.) This shortage of capital is at least one 
reason why Iran's automobile sector is now encountering significant 
difficulties, manufacturing at some 50 percent of nominal capacity and 
facing substantially reduced exports.

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


Claimed Impact on Humanitarian Trade
    There have been some reports of shortages of some medicines in 
Iran, and that some banks may be reluctant to process payments for the 
export of pharmaceuticals and other humanitarian goods to Iran. At the 
same time, however, we have also been told by major pharmaceutical 
companies that they are able to deliver their products to Iran and 
receive payment.
    Regardless of this discrepancy, we take this issue very seriously. 
President Obama has made clear that we have nothing but respect for the 
people of Iran. The goal of our sanctions on Iran is to expose and 
impede the Iranian Government's continued pursuit of its nuclear and 
ballistic missile programs, and to help persuade the Iranian leadership 
that its only viable choice is to come into compliance with its 
international obligations.
    That is why it has been the longstanding policy of the United 
States to allow the export to Iran of humanitarian items, such as food, 
medicine, and medical devices. Our sanctions broadly authorize the sale 
and export to Iran of nearly all types of food and medicines, as well 
as basic medical supplies. No special permission is required to sell 
these humanitarian goods to Iran. And foreign financial institutions 
can facilitate these permissible humanitarian transactions, as long as 
the transaction does not involve a U.S.-designated entity, such as a 
bank sanctioned for supporting Iran's nuclear program.
    To allay any concerns or misunderstandings, several months ago 
Treasury's Office of Foreign Assets Control (OFAC) published detailed 
guidance clarifying our longstanding policies regarding humanitarian 
assistance and related exports to the Iranian people. I encourage 
anyone concerned about this issue to read OFAC's guidance, which is 
appended to this testimony. Moreover, we and our colleagues in the 
State Department have met with governments, banks, and pharmaceutical 
exporters in Europe and Asia to ensure that they understand the reach 
and limits of our sanctions.
    So let's be clear about this issue. Whatever shortages may exist, 
and whatever reluctance foreign banks may have to process transactions, 
the root cause is not our sanctions programs, it is the actions of the 
Iranian Government.
    This fact is perhaps best illustrated by a recent incident 
involving Iran's former Health Minister, Marzieh Vahid Dastjerdi. Late 
last year, Minister Dastjerdi publicly complained that the Iranian 
Central Bank had failed to provide the Health Ministry with the $2.4 
billion in hard currency that had been budgeted for the Ministry's 
import of medicines and medical devices. Instead, the Central Bank made 
only $600 million--a quarter of the budgeted amount--available to the 
Ministry. Pointing out that short-changing the Health Ministry so 
drastically would threaten shortages of medicines and medical devices, 
the Health Minister objected. Instead of heeding her warnings, the 
Ahmadinejad government fired Minister Dastjerdi.
    And to the extent that foreign banks may be reluctant to facilitate 
permissible transactions with Iran, that, too, is due to the actions of 
the Iranian Government. It is by now well-established that Iranian 
banks have abused their access to the international financial system by 
deceiving their banking counterparties about the true nature of the 
transactions in which they engage by hiding transactions that 
facilitate Iran's nuclear and ballistic missile program among otherwise 
legitimate transactions. This has led many foreign banks to restrict, 
if not terminate entirely, their interactions with Iranian banks. It is 
thus entirely understandable that foreign banks that maintain 
relationships with Iranian banks may nonetheless be wary about 
facilitating otherwise permissible transactions.
                               next steps
    Despite our success in increasing pressure on Iran, we have yet to 
see the regime change its fundamental strategic calculus regarding its 
nuclear program. Nonetheless, the administration remains convinced that 
sanctions pressure has an important role to play in helping to bring 
about a negotiated resolution. Accordingly, our commitment to the dual-
track strategy--and to applying ever more effective and potent economic 
and financial pressure on Iran--has never been greater. We look forward 
to continuing to work with Congress on this endeavor.
    Let me briefly share with you some thoughts on where we go from 
here.
Increasing Iran's Isolation
    First, we will continue to identify ways to isolate Iran from the 
international financial system. We will do so by maintaining our 
aggressive campaign of applying sanctions against individuals and 
entities engaged in, or supporting, illicit Iranian activities and by 
engaging with the private sector and foreign governments to amplify the 
impact of these measures. As part of this effort we will also target 
Iran's attempts to evade international sanctions through the use of 
nonbank financial institutions, such as exchange houses and money 
services businesses. And we will explore new measures to expand our 
ability to target Iran's remaining links to the global financial 
sector.
    In particular, we are looking carefully at actions that could 
increase pressure on the value of the rial. In that connection, we will 
continue to actively investigate any sale of gold to the Government of 
Iran, which can be used to prop up its currency and to compensate for 
the difficulty it faces in accessing its foreign reserves. We currently 
have authority under E.O. 13622 to target those who provide gold to the 
Iranian Government and, as of July 1, IFCA will expand that authority 
to target for sanctions the sale of gold to or from anyone in Iran for 
any purpose.
Targeting Additional Sources of Revenue
    Second, we will continue to target Iran's primary sources of export 
revenue. In addition to oil and petroleum products, Iran exports 
substantial volumes of petrochemicals. Current authorities allow us to 
target those who purchase or acquire these commodities, as well as the 
financial institutions that facilitate these transactions. We believe 
targeting these actors, as well as those on the supply side of the 
equation in Iran, may offer a meaningful opportunity to gain additional 
leverage.
Engaging with International Partners
    Third, with State, we will maintain our robust engagement and 
outreach efforts to foreign governments and the private sector. 
Treasury regularly meets with foreign officials and financial 
institutions to explain our sanctions, to warn them of the risks of 
doing business with Iran, and to encourage them to take complementary 
steps. In response, we have seen jurisdictions and companies the world 
over respond positively to these overtures, multiplying the force of 
our sanctions many times over. As we have for CISADA and the NDAA, we 
have already begun to engage with foreign countries, banks, and 
businesses on the implications of IFCA, and will continue to do so as 
we move forward in our implementation of this important legislation.
Aggressive Enforcement
    The administration campaign to target Iran's proliferation 
networks, support for terrorism, sanctions evasion, abuse of human 
rights, and complicit financial institutions is without precedent. It 
will only continue and grow more robust as Iran's failure to meet its 
international obligations persists. As I believe we have amply 
demonstrated, we are relentless in pursuing those who facilitate Iran's 
illicit conduct or otherwise enable the regime. That will continue 
unabated.
                               conclusion
    Despite our efforts to isolate and pressure Iran, we know there is 
far more to do.
    As Secretary Lew has said, ``We will exhaust all diplomatic and 
economic means we can.'' What remains to be seen, he noted, is whether 
this will ``change the mind of the regime so that it [is] ready to, in 
a diplomatic process, give up the pursuit of nuclear weapons. That is 
the goal.''
    I know this committee shares this objective, and I look forward to 
working with you and your colleagues in the Congress to advance our 
efforts to achieve it.

    The Chairman. Well, thank you both very much.
    Let me start off with: Our challenge is that so far this 
has not changed Iran's calculus or, I should say, the Supreme 
Leader's calculus. So peaceful diplomacy tools are limited. 
Sanctions is one element of that. The question is, Is there 
anything more that we should be considering doing that would 
make it ever more clear that the consequences of continuing on 
a path to a nuclear weapons program is not sustainable for them 
and at the same time be able to keep the unity that we have of 
a coalition that we have built, which I personally think is 
very important?
    In that regard, Madam Secretary, there is reputable 
reporting that oil markets are now predicted to be loose for 
the coming year because of Iraqi, Libyan, and other lines 
coming back on the market. It would seem that this is the time 
to press our allies to further reduce crude purchases from 
Iran. So what is your view, meaning the administration of 
course, with reference to seeking further reductions, which was 
envisioned in the legislation that was unanimously passed by 
the Congress, from countries that are still purchasing 
petroleum, have made some reductions, but which we have also 
given waivers to along the way because we have considered their 
reductions to be a significant amount? But at this point, with 
the market seeming to be well positioned to accept further 
cuts, what is the view of the administration in that regard?
    Ms. Sherman. Thank you, Mr. Chairman. As you noted, when we 
began all of this, working with you, there were 20 countries 
who imported Iranian oil. We are now down to only six countries 
who continue to import any Iranian oil, and all of those six 
countries, which are China, India, Turkey, South Korea, Japan, 
and Taiwan, have made significant reductions in their 
importation of Iranian oil.
    We are continuing, of course, to press them for further 
significant reductions, as is required under the law. One of 
the things that you mentioned is that we have worked very hard 
to keep the international coalition together and we have worked 
very hard to keep the P5+1 countries together in a unified 
force, because that unity, whether it is at the U.N. Security 
Council or the IAEA or in negotiations, allows us to enforce 
sanctions, keep the pressure on Iran, and shows that Iran 
cannot split off people and find allies and partners in the 
world for their destructive actions. So that coalition is very 
crucial.
    So if we want reductions beyond what is in current 
legislation, we have to work very carefully with countries. I 
know that for many in Congress there is great concern about 
China, which is the single largest consumer of Iranian oil. But 
China has made significant reductions. They are up for a 
further exception and we will be looking at the data that is 
coming in from April--it always is a lagging indicator--before 
making a judgment and notifying and consulting with Congress.
    But I think it is important, using China as an example, to 
note that--I am going to read this because it is hard to keep 
it straight--``A given percentage reduction in China would be 
approximately equal to a volume reduction twice as large as the 
same percentage reduction from India, three times from South 
Korea, and four times from Turkey.'' That is how much the 
volume matters, because China's importation is so large.
    So any reduction China makes has an outsized impact on 
Iran's oil consumption. So we are pressing China. We have 
ongoing conversations. We expect them and we expect every other 
of the six importers to continue their significant reductions.
    The Chairman. We will be looking forward to seeing where we 
are at with these other countries. And I recognize the volume 
question. However, I also recognize that, considering where the 
oil market is today, that it seems to me that we have the 
wherewithal to vigorously advocate with these countries for 
reductions because they can offset their purchases in a way 
that really would not domestically harm them. So I hope that we 
will do that as part of our effort her.
    Let me turn to Secretary Cohen and ask about two different 
elements. We have, as a result of a law that we passed, new 
sanctions coming on line on July 1--you mentioned it in your 
remarks--with respect to transactions with certain Iranian 
economic sectors, like the shipping and shipbuilding sectors. 
First of all, I want to hear from you how you intend to 
vigorously enforce those sanctions.
    Second, I would like to hear whether, because there is 
reporting that Iran is using its automotive sector particularly 
to produce dual-use items for its nuclear program, are you 
looking to add additional sectors by Executive order?
    Then last, the administration issued an Executive order 
banning gold sales to the Government of Iran and that 
initiative, along with a ban on sales of other precious metals, 
was codified late last year by the Congress. Reporting 
estimates, however, show that Iran has received $6 billion in 
gold since last summer, an amount equivalent to about 10 
percent of Iran's total 2012 oil exports of $60 billion. This 
also represents about 6-to-10 percent of Iran's estimated 
foreign exchange reserves.
    The P5+1 process reportedly offered Iran relief from the 
ban on gold sales during the last rounds of talks. With the 
talks--I think generally viewed as not having succeeded; some 
may suggest failed, but their not having succeeded--will we now 
see robust enforcement of the ban on sales of precious metals 
to Iran?
    Mr. Cohen. Mr. Chairman, let me take those questions in 
reverse order and address the gold issue first----
    The Chairman. That is not to confuse me, is it? (Laughter.)
    Mr. Cohen. No.
    First with respect to gold, obviously you are correct that 
the Executive order adopted last summer authorizes the 
administration to impose sanctions on anyone who is selling 
gold to the Government of Iran. Now, regardless of what may, or 
may not, have been offered in Almaty, we are actively enforcing 
that provision. We have been very clear with the countries that 
are exporting gold to Iran, principally Turkey and the UAE, on 
precisely what the law permits and what it forbids, and we are 
following the information very carefully.
    I would note that there is also substantial reporting that 
there is a tremendous demand for gold among private Iranian 
citizens, which in some respects is an indication of the 
success of our sanctions. They are dumping their rials to buy 
gold as a way to try to preserve their wealth. That is, I 
think, an indication that they recognize that the value of 
their currency is declining. And as of July 1 when the 
provision in IFCA comes into effect, that activity will also be 
subject to sanction. As of July 1, the sale of gold to any 
person in Iran, whether it is the Government of Iran or a 
private citizen, is forbidden, and we have been very clear with 
the Governments of Turkey and the UAE and elsewhere, as well as 
the private sector, that are involved in the gold trade, that 
as of July 1 it all must stop, not just the trade to the 
government.
    With respect to whether we are considering additional 
sectors to target through Executive order, one thing that we 
are very much committed to is enhancing sanctions pressure 
through a variety of means. The watchword that we are pursuing 
in how we are looking at enhanced sanctions is revenues, 
reserves, and the rial. That is what we are focused on, and 
that means we are looking at a variety of different means to go 
after Iranian revenues, to lock down their reserves, and to 
affect the value of the rial. And if that means additional 
sectors, we will consider that.
    Finally--I know I am substantially over time--with respect 
to the implementation of IFCA on July 1, we are working very 
closely with our colleagues at State to put into place the 
mechanisms for the enforcement of that law, which targets the 
energy, shipping, shipbuilding sector, targets insurance, 
requires that gas sales, the revenue from gas sales, be treated 
the same way as the revenue from oil sales under the TRA, so 
that the gas sale revenue will also be locked down.
    All of these provisions we are looking forward to 
implementing as of July 1. We have been out around the world 
explaining what this new provision, what IFCA provides, so that 
our partners around the world understand what the new rules 
will be and we will enforce that law vigorously.
    The Chairman. I appreciate your answer.
    Before I turn to Senator Corker, enforcement of sanctions 
is as important, if not even more important, than the sanctions 
themselves. Otherwise they are toothless tigers. So we will be 
looking forward to a continuing oversight as to how we are 
moving in the enforcement side.
    I want to just correct the record. I had said ``waivers'' 
earlier; I meant ``exceptions,'' as it relates to some of the 
countries that we are dealing with.
    Senator Corker.
    Senator Corker. Thank you, Mr. Chairman.
    Again, thank you for your testimony. We have had a number 
of settings both publicly and privately where we have talked 
about the sanctions. For what it is worth, I am impressed with 
what the sanctions have done thus far. I am very unimpressed 
with the behavior change that it is actually created. I am just 
curious. I know you have to be frustrated with that. You look 
at the results of what is happening and yet no behavior change.
    What are some of the things that you talk about internally? 
If we continue down this road for the next 3 or 4 months, again 
with no behavior change, what are the additional sanctions, 
actions by the U.S. Government, that you discuss internally if 
this continues on the path that it is?
    Ms. Sherman. Well, let me begin and then let David pick up. 
First of all, both to your point, Senator, and to the 
chairman's point as well, I should have mentioned that before 
Secretary Clinton left office she made a change in the State 
Department. She created a sanctions coordinator and that office 
is being held by Ambassador Dan Fried, with a small team that 
sits in the Deputy Secretary's office and also works with me 
and all of the regional bureaus, so that State has a stronger 
partner to work with Under Secretary Cohen in the enforcement 
of sanctions.
    So I think that one of the things that you will see in the 
coming year, because Secretary Kerry has his eye very much 
focused on this, is that we increase our diplomacy even more to 
ensure that all of the sanctions authorities we have are fully 
enforced and that people understand the risks that they face by 
dealing with Iran. That is not only the sanctions enforcement, 
but that is when Iran comes and wants to open an embassy in 
their country, to make them understand that they are going to 
get the MOIS, the intelligence services, they are going to get 
the IRGC-Quds Force, the military arm of Iran, at the same 
time, and they are going to increase the destabilization in the 
region.
    Senator Corker. If you don't mind, I do not really want to 
talk about some of the processes. If you will, focus more on 
tangible things, our actions toward Iran, that you will be 
considering if we continue down this path for the next 4-to-6 
months and there is no behavior change. I appreciate all of the 
procedural things.
    Ms. Sherman. Sure, sure.
    Senator Corker. But I am not really that interested in 
that.
    Ms. Sherman. We are looking at additional sanctions 
enforcement and more sanctions and more sectors.
    Senator Corker. What do those sanctions look like?
    Ms. Sherman. I think that probably what we need to do is 
consult with you, with the pending legislation that is up here 
on the Hill. Many of the things----
    Senator Corker. Do you generally support the pending 
legislation?
    Ms. Sherman [continuing]. Many of the things you are 
looking at are things that we support as well, and we are 
having ongoing, I think, staff-to-staff consultations in that 
regard. We are looking at additional Executive orders. We are 
looking at our military posture and making sure that we 
continue to send signals. We are looking at our actions in 
Syria, which is very crucial to Iran's position in the world, 
and how we can bring that violence to an end and help the 
opposition get the future they want in Syria.
    So there are many vectors to this approach, Senator.
    Senator Corker. What kind of reserve does the Government of 
Iran have on hand for their internal use?
    Mr. Cohen. Senator, I am going to push my button and then I 
am going to say I cannot answer that question in this setting. 
I know we are going to try and----
    Senator Corker. You cannot tell us? I mean, we talk all the 
time about the reserves that Syria has in public settings. You 
cannot tell us what kind of reserves Iran has in a public 
setting?
    Mr. Cohen. I think it is better that we discuss this in the 
closed session. The one point I will make about Iran's 
reserves: Whatever the total amount is, we also know that their 
access to those reserves is substantially impaired. So the 
sanctions that we have in place, in particular----
    Senator Corker. So in a private setting you could probably 
tell us how much longer they can survive; is that correct?
    Mr. Cohen. We can discuss the total amount of reserves, 
what we think they have access to, and how long we think those 
reserves will hold out, Senator.
    Senator Corker. One of the things that we are doing is 
place pressure on their currency. Obviously with their currency 
being devalued the way that it is it can facilitate exports, 
which many central bankers around the world are trying to do. 
What impact are we having on the other sectors such as the 
manufacturing sectors? Are we actually enhancing Iran's ability 
to export around the world because of the depreciating rial?
    Mr. Cohen. The depreciating rial does have the effect of 
making Iran's exports somewhat more attractive. However, we 
also have a range of sanctions focused on exports from Iran, 
including exports of petrochemicals from Iran, that work 
against whatever----
    Senator Corker. How much of an offset is it creating 
whereby the other parts of their domestic economy are 
flourishing as a result of the policies, and how much is that 
offsetting the petrochemical component and petroleum component?
    Mr. Cohen. Senator, our assessment is that the Iranian 
economy is not flourishing in any respect. Their GDP, as I 
mentioned earlier, is contracting anywhere from 5-to-8 percent 
in the last year, and it will contract again this coming year. 
Their ability to transact internationally, to receive payments 
for exports, is substantially impaired because of the whole 
raft of financial sanctions that are in place. So I think 
whatever collateral benefit there may be from a depreciating 
rial to the export of Iranian goods is more than offset by the 
other actions we have taken.
    Senator Corker. I do look forward to the classified setting 
and you talking more about the reserves.
    Let me ask two additional questions. I know you do not want 
to mention names because we do not want to hurt candidates, if 
you will, in the Presidential races that are taking place. But 
is there any qualitative difference from your perspective in 
the candidates that we think will be seeking to lead Iran as it 
relates to this issue?
    Ms. Sherman. I would say, Senator, that there are probably 
some candidates who would be perceived by us as more interested 
in looking at the nuclear negotiations in a more positive vein. 
However, the nuclear file is held by the Supreme Leader and no 
one else, and he is the final decisionmaker regarding the 
nuclear file.
    We have seen today that conservative commentators are 
pushing very hard against Mashaei and Rafsanjani because they 
do not see either of those candidates as tough enough, and 
obviously Jalili is a candidate himself, who is the negotiator 
opposite us right now. So I think there is a lot to play out 
here. As I said, there are over 600 candidates. By the 23rd of 
May, the Guardian Council will winnow that down to just a 
handful, maybe four or five. There will be a lot of gaming that 
goes on. Some people speculate Rafsanjani might drop out in 
favor of Rouhani. But I think we do not know yet, and I think 
we do not know the impact. As you may recall, in 2009 everyone 
thought Ahmedinejad was going to be one kind of leader, and he 
has turned out to be quite another kind of leader.
    I might add, Senator, just on your last question, as an 
interesting data point, the IMF projects that FDI--foreign 
direct investment--in Iran dropped to $1.1 billion in 2012 from 
$4.1 billion in 2011. So there has been a substantial decline 
in the economy.
    Senator Corker. Look. Again, the effect of the sanctions is 
pretty remarkable. It is just unremarkable as far as the 
behavior change. I know we are going to be looking at deeper 
sanctions. But I do appreciate the efforts that you are putting 
forth and for being here today.
    Secretary Sherman, one of our goals and missions as we work 
with other countries is to ensure that we have the rule of law 
and that we rout out corruption; is that correct?
    Ms. Sherman. Absolutely.
    Senator Corker. I have inquired recently of the 
administration regarding the fact that President Karzai in 
Afghanistan has continued to talk about the fact that we are 
delivering suitcases full of cash to him and he expects that to 
continue. I have asked about that and I have been told by the 
administration that in essence this is none of my business and 
it is not in my jurisdiction.
    Now, I am the ranking member on Foreign Relations, which 
does not mean a lot, but based on what you just said, I guess 
that is in my jurisdiction. Let me just ask this question: Do 
you think that delivering cash to a government that has been 
around for many, many years and is democratically elected aids 
us in fighting corruption?
    Ms. Sherman. Well, I would say, Senator, that I appreciate 
your concern. What we seek in Afghanistan is a stable 
government going forward. The United States has made a 
substantial investment in helping that country get to a place 
where----
    Senator Corker. Does delivering cash to a leader, an 
elected leader, does that help us rout out corruption in that 
country?
    Ms. Sherman. I think, Senator, we of course want to rout 
out corruption every way we can. My sense is the particular 
instance that you are discussing is better discussed in a 
classified session.
    Senator Corker. Well, you know, if it has to be discussed 
in a classified setting then I cannot talk about it. And yet 
the President of Afghanistan is talking about it, and so it is 
in a public setting, and I expect a public response. So I thank 
you. I guess I will have to ask the President of Afghanistan 
what is happening with this cash.
    But thank you so much.
    The Chairman. Or maybe on your next golf outing.
    Senator Cardin.
    Senator Cardin. Thank you, Mr. Chairman.
    Let me thank both of our witnesses. It is very clear, 
United States policy in regards to Iran and I thank you both 
for being unequivocal in the manner in which you have presented 
this. Our strategies are clearly to isolate the Iranian regime 
as long as it continues to deny compliance with international 
obligations, and to strengthen that by increasing sanctions and 
isolation and enforcement, which I fully support.
    At the same time, you will continue on the diplomatic side, 
if I understand, with the P5+1, but not to allow that to weaken 
or delay the isolation efforts. That is how I understand the 
administration's policy, which, I think, is totally consistent 
with the support that you have here in Congress.
    So let me get to, I think, the chairman's point. There are 
two aspects to isolation. We can strengthen the sanctions, and 
Congress is looking at legislation today to give you additional 
tools. One thing that we have seen from the international 
community is they look to the United States to show how we can 
increase the pressure on Iran. We are the leader. We have many 
countries around the world that are very willing to work with 
the United States and to take our leadership, and that is why 
these resolutions that we consider and the sanctions 
legislation that we pass becomes particularly important, 
because it becomes the standard for what other countries are 
willing to do.
    But then there is another group of countries that sort of 
say, well, you know, we are with you, but we have our own 
agenda. We got into somewhat of a discussion as to the 
countries that are still importing crude oil, are still doing 
business with Iran. I would hope that you could supply us some 
additional information as to what is reasonable for us to 
expect.
    I chair the East Asia and Pacific Subcommittee and we will 
have conversations with the Chinese and the Japanese and the 
Koreans, and it would be, I think, important for us to know 
what we could further expect. I was very interested in your 
analysis on China, how important China is to Iran in regards to 
a market for its crude oil. It is not just the volume level, 
but under what conditions they are doing business with Iran, 
that we could seek stronger enforcement.
    So if you could share that with us, so that we have a game 
plan of our expectations. With Japan and Korea, we are talking 
about close allies. It would seem to me that as we look at 
imposing new sanctions the first order of business is to 
enforce the current sanctions. I know they may be in compliance 
with the law, but we would like it to be--the intent of our 
sanctions is to isolate as much as possible the Iranian regime. 
So any information you could supply in that regard I think 
would be particularly helpful.
    Then of course, it has been several years since the 
Security Council has acted in regards to Iran. What is the 
prognosis of getting help from Russia and China to pass a 
stronger message from the Security Council, which I think would 
have an incredible message on Iran?
    Ms. Sherman. Thank you very much, Senator. I indeed met 
with my Japanese counterpart yesterday and we had a very 
vigorous discussion about further enforcement and reductions of 
oil. This has been very tough for Japan because one of the 
things that I have learned in not quite the 2 years I have been 
in this job is there are many versions of crude oil, there are 
many different ways that refineries can deal with crude oil. So 
making the mixes and matches that work with the supplies that 
are available is very complicated to achieve these reductions.
    So I am very grateful for what Japan has done, and for what 
China has done as well. Indeed, China reduced its oil imports 
from Iran by 21 percent in 2012 compared to the previous year. 
They are doing that not just because of our unilateral 
sanctions, which they do not support--many countries do not 
support our unilateral sanctions, not just China--but because 
it is in their interest to reduce their risk and Iran is a 
risky place from which one should import oil.
    We also believe, however, that we have to enforce our laws 
and that if that means penalizing entities in a country, 
including China, we will do so. On February 11, 2013, we 
announced the imposition of nonproliferation sanctions on four 
Chinese entities. On July 31, 2012, the Department of Treasury 
imposed sanctions under CISADA against the Bank of Kunlun, 
which David can talk about further, and Zhuhai Zhenrong as 
well. So we will do what we need to do----
    Senator Cardin. But can we get China to work with us with a 
new Security Council resolution, that perhaps then they will, 
since they are part of the development of these sanctions, we 
get compliance?
    Ms. Sherman. I think that right now it probably would be 
difficult to get all of the members of the Security Council to 
move on a new resolution. What I think may change that calculus 
is not only our sanctions and the enforcement, but actually 
what is happening with the IAEA and what is happening with the 
IAEA today. They are meeting with Iran around a structured 
approach. I do not think they are going to get a positive 
response.
    The Board of Governors will meet in early June. At some 
point, the Director General of the IAEA will have to return to 
the Security Council and say: I can go no further; there has 
been no response; you have to take further action. Whether that 
will happen this June or whether that will happen in September, 
I am not sure. But there will come a point at which all of the 
international community, all of the Security Council, will have 
to confront that the IAEA is not able to move forward in 
finding out the dimensions of Iran's nuclear program.
    Senator Cardin. I had a chance to meet with the Secretary 
General of the IAEA recently and I was very impressed that the 
information that they were sharing was very similar to the 
information that we had in the United States. So there is 
really no difference here about the assessment of where Iran is 
on the scale.
    I think you are right, getting IAEA more actively engaged 
with the United Nations and the Security Council puts this at a 
level that, if we expect Iran to comply with its international 
obligations, the Security Council is going to have to take 
stronger measures.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Johnson.
    Senator Johnson. Thank you, Mr. Chairman.
    Can either of you just kind of bring me up to speed a 
little bit in terms of the condition of the opposition forces 
there, especially after the 2009 uprising?
    Ms. Sherman. Quite frankly and sadly, Senator, the Green 
Movement virtually is nonexistent as an organized force inside 
of Iran. The repression, the killings, the efforts to close 
down any possibility to organize, has really depressed that 
capability.
    That said, I do not think any of us know what will happen 
in the runup to this election. We had not expected fully what 
the Green Movement did, and the Green Movement actually, quite 
frankly, was focused more on voter fraud than it was focused on 
regime change at the time of the 2009 election. So we are doing 
whatever we can in the runup to this election to encourage 
voices in Iran to press for the kind of freedom and fair 
election that the Iranian people deserve.
    There are a variety of things, some of which we can talk 
about when we have our classified session, but in public we are 
not only using our virtual Embassy to share information, but we 
are helping to make sure that technology cannot be jammed, so 
that people have access to cell phones and computers so they 
know what is going on, so that they can use the tools that 
might be valuable to give them a possibility of a future and of 
a free and fair election.
    We do not expect one, but we want to help the Iranian 
people to be able to speak with the voice that they should 
have.
    Senator Johnson. Do we have any assessment of how many of 
those opposition leaders were killed, how many are jailed? Any 
kind of numerical assessment?
    Ms. Sherman. I do not have those numbers off the top of my 
head, but I would be glad to try to see if we can get them for 
you.
    [The State Department's written reply to Senator Johnson's 
question follows:]

    The Iranian Government officially confirmed that 36 people were 
killed during the post-election protests in 2009, although many 
opposition figures and activists contend that more than 100 were killed 
in the weeks and months following the vote.
    The Iranian Government also officially confirmed that at least 
4,000 people were detained during the 2009 protests. Among those 
arrested were numerous student leaders and other figures within the 
Green Movement, many of whom remain in jail today.
    It is difficult to determine the exact number of those killed or 
arrested in the post-2009 election period, given the lack of 
transparency by Iranian authorities, but certainly dozens died and 
thousands were jailed during this time. Hundreds of activists 
associated with the Green Movement or other civil society groups have 
since fled the country. Many activists report there currently are at 
least 500 political prisoners in Iran, including Green Movement 
leaders, Mir Hossein Mousavi, Mehdi Karoubi, and Karoubi's wife, Zahra 
Rahnavard, who remain under house arrest since February 2011 on 
unspecified charges.

    Senator Johnson. Secretary Cohen, so we actually do have an 
assessment; you just do not have them off the top of your head? 
OK.
    Mr. Cohen. If I could just add one thing to what Wendy 
said, one of the Executive orders that the President adopted 
this past year is known as the gravity Executive order. It 
focuses on gross human rights abuses through the use of 
information technology both in Iran and in Syria. We have 
designated a number of entities in Iran, some in Syria as well, 
for the use of information technology in a way that restricts 
the free communication among the people in Iran.
    We are obviously very interested to see what transpires in 
the course of this election and will be prepared to apply that 
authority if we see evidence that the use of information 
technology is affected by the regime in a way that it restricts 
the communications among the people during the election.
    Senator Johnson. Do we have an assessment of how many 
fighters Iran has operating in Syria right now?
    Ms. Sherman. We do not have an exact number. When you have 
the classified session, the intern intelligence community 
briefer can give you his assessment. There is no question, I 
believe, that the IRGC-Quds Force is present, is training 
militia, is providing a lot of dollars, has financed Hezbollah 
as a proxy force. We all heard Nasrallah's speech last week in 
which he laid down the gauntlet that anyone who wants the 
destruction of Israel should join forces in the fight in Syria. 
We take this very, very seriously.
    Senator Johnson. Logistically, how are those fighters, how 
is the material, getting to Syria from Iran?
    Ms. Sherman. It is getting to Syria from Iran in many ways. 
I assume, Senator, that one of your questions regards 
overflights of Iraq on its way to Syria. We are very focused on 
interdicting not only those overflights and urging the 
Government of Iraq to inspect those flights.
    Senator Johnson. How would we interdict those flights?
    Ms. Sherman. We have pressed very hard for the Government 
of Iraq to inspect those flights and they have begun to do so. 
Is it effective as we want it to be? No.
    Senator Johnson. If we had a status of forces agreement in 
Iraq, would we be interdicting them ourselves?
    Ms. Sherman. I dout that. There is now a sovereign 
government in Iraq.
    Senator Johnson. So you do not think--there is no regret on 
the part of the administration that we did not negotiate a 
status of forces agreement, so we had a presence there in Iraq 
to be able to possibly affect this?
    Ms. Sherman. I think, Senator, you remember that we had 
tried to negotiate a status of forces agreement. We said it was 
the only way and the only basis on which we could have a 
continuing presence in Iraq. The government did not want to do 
that. We are not going to put our military or our people at 
risk in that fashion.
    But even so, this is a sovereign government. We can use the 
pressure and leverage that we have and we are to making sure 
that all of those planes are inspected.
    Senator Johnson. That is all the questions I have. Thank 
you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Casey.
    Senator Casey. Thank you, Mr. Chairman.
    Under Secretary Sherman and Under Secretary Cohen, we 
appreciate your testimony today and your public service on a 
set of really difficult issues.
    I wanted to focus on two areas in the time that I have. One 
is Syria and second, similar to what Senator Johnson raised, 
the issue of human rights and Iran and steps that we have taken 
but, frankly, further steps that we can take. I noted in your 
testimony--and I know when you have comprehensive testimony you 
do not get to all of this in your opening remarks, but you did 
speak to this. Both of you did. Under Secretary Sherman, on 
page 8 you talked about, with regard to the human rights 
situation, ``a culture of fear in Iran.'' You say: ``We're 
committed to raising the cost of repression and helping 
Iranians break through the electronic curtain that the regime 
has put in place.''
    You talked about sanctioning 30 Iranian individuals and 
entities for engaging in serious human rights abuses and 
censorship activities. Later you talk about the virtual Embassy 
in Teheran and 
the way we have brought technology to bear on opening up that 
country.
    We know from what happened in 2009 a couple of things were 
evident to me at that time. No. 1 is, despite the brutal 
repression of that Green Movement and efforts like it, I do not 
think there is any question that what stirred in the hearts of 
Iranians at that time is enduring. It might be repressed, it 
might be dampened, but once that happens, I think, in the 
hearts of any people, I think it is very difficult to suppress 
it over time, even though here we are 4 years later and it 
still has not really flourished.
    A couple of years ago, I guess it was back in 2009, a $20 
million effort was made in the so-called VOICE Act. Senator 
McCain and others were very active in that, led that effort. 
That $20 million was a darn good expenditure when we consider 
the impact it can have on the people of Iran.
    So I guess I would ask you--let me just add one quick 
editorial comment, then ask you a question about it. Members of 
Congress could do a lot more to speak to this. As much as it is 
important that we lead with a focus on Iran's nuclear program, 
as much as it is important that we focus on other elements of 
our strategy, this part of our strategy, on human rights, we do 
not talk about enough. Candidly, the President does not talk 
about it enough. I think we have got to make it a central 
feature of our strategy, because if we do not talk about it it 
really is not enough of a strategy.
    I would ask you, in addition to what you have already done, 
and you have highlighted that, for both witnesses: What more 
can we do, meaning the Congress and the administration, and 
what more do you have planned to not only put pressure on the 
regime as 
it relates to human rights, but also to do everything we can to 

open up that country by the use of technology and a more 
focused strategy?
    Ms. Sherman. Thank you very much, Senator. Clearly, as we 
approach the election June 14 in Iran, making sure that we do 
everything we can so that the people of Iran have a way to make 
their voices heard is crucial. Some of those I can talk about 
here, some of those when we are in classified session. But we 
are trying to make sure that things, as I said earlier, cannot 
be jammed, that people have cell phone access, that they have 
ways to talk to each other, communicate and organize to the 
extent that they want to. We do not take sides. We just want a 
free and fair and open election for the people of Iran.
    We have also worked very actively in the Human Rights 
Council and will continue to do so. We led the efforts in 2011 
to create the mandate for a U.N. Special Rapporteur for Iran. 
We think this is very important. We have increased the support 
for that over the years. We have issued our own Iran human 
rights report in our overall human rights report and tried to 
point out what is happening, again saying Iran is a country of 
particular concern.
    We have pressed very hard in both public comments as well 
as through the Swiss, who represent us in Iran, to free the 
three American citizens, the two that are held in prison and 
Robert Levinson, for whom we do not know where he is, in every 
way we can, working with the FBI as well on Mr. Levinson, to 
raise these issues up and to make the world aware of the 
repressive actions of Iran.
    I agree with you, Senator, there is not really enough we 
can do about the human rights abuses in Iran, and I quite agree 
with you that we all need to speak about them more, because it 
is that kind of repression that does not allow the people of 
Iran to speak their minds and ensure their future.
    Senator Casey. Under Secretary Cohen.
    Mr. Cohen. Senator, I completely agree with Under Secretary 
Sherman's description of the importance of focusing on human 
rights abuses in Iran. For our part, working with the State 
Department, we have the authority to apply sanctions on human 
rights abusers in Iran and we have done so. Candidly, those 
sanctions are most important for exposing those who are 
involved in human rights abuses. These are not sanctions that 
we expect to freeze substantial amounts of money here in the 
United States, but they do shine an important light on human 
rights abusers in Iran, and we are going to continue to 
implement that and designate people for human rights abuses.
    Earlier this year, following the passage of IFCA, we 
applied sanctions on the Islamic Republic of Iran Broadcasting 
Company and its leader, in part because of their distortion of 
the communications in Iran. But this is an area where we are as 
an administration very focused and quite intent on continuing 
to expose human rights abuses in Iran.
    Senator Casey. I think if we--and I know I am running out 
of time in about 30 seconds. But I like to think about it as 
kind of a three-part strategy. You could probably add another 
element to it. One is the obvious focus on the nuclear program. 
You outlined in your testimony the impact on GDP and their oil 
production, so we are seeing results there.
    We talked about human rights and I think it has to be a 
second element of our strategy. But also just the daily threat 
that both Iran, Hezbollah, and all the terrorist organizations 
you have outlined in your testimony that they work with. They 
are the--as I like to say--the backer and banker of all the bad 
guys we can think of.
    That brings me--and I know we are out of time, but I will 
just put this on the record--brings me to Syria, because if the 
Assad regime falls it is obviously a bad day for Iran, a bad 
day for Hezbollah, and undermines their ability to plot against 
us, as both of them do each and every day. I know our folks 
work very hard to confound those plots.
    So we will talk more about the impact on Iran that our 
policy in Syria can have. Thank you very much.
    The Chairman. Thank you.
    Senator Risch has deferred to Senator McCain.
    Senator McCain. Thank you, Mr. Chairman.
    If I could just follow up on Senator Corker's question, it 
is well known that we are delivering bundles of cash to 
President Karzai. It has been published. Would we object if 
other nations delivered bundles of cash to President Karzai?
    Ms. Sherman. Senator, I think what we are focused on is 
how----
    Senator McCain. I would like you to answer the question.
    Ms. Sherman. Well, Senator, it is a hard question to 
answer.
    Senator McCain. All right.
    Ms. Sherman. We are, of course, concerned about what other 
governments do all over the world.
    Senator McCain. But it is OK for us to do it, but not for 
others?
    Ms. Sherman. I think this is a discussion that is better 
had, as I said, in a classified session.
    Senator McCain. I think the American people need to know 
what is being done with their tax dollars. I think that--and 
they should know in open session. And the fact is that we have 
billions of dollars in aid programs that are open, transparent, 
subject to the scrutiny of this committee and the Congress of 
the United States, but somehow we cannot talk about the fact 
that bundles of cash--and I happen to be a strong supporter of 
President Karzai in many ways--but it is not OK for us to talk 
about bundles of cash that are being delivered to President 
Karzai, and we would not--none of us would know about it if it 
had not been, obviously, in the media.
    So hard question to answer, but I think it should be 
answered. Would we object if other countries or other entities 
or other organizations were delivering bundles of cash to 
President Karzai?
    Ms. Sherman. I hear your question, Senator. Thank you.
    Senator McCain. As the U.S. representative for the P5+1 
talks, what progress has been made in advancing our goal of 
preventing Iran from achieving nuclear weapons since the 
negotiations resumed last year? I couched that question in the 
context that I note that in January 2009, according to the 
IAEA, the Iranians had 1,000 kilograms of uranium enriched to 
3.5 percent; today they have more than 8,000 kilograms. And in 
January 2009 they had not enriched to 20 percent; and today 
they have almost 280 kilograms.
    So I repeat the question: What progress has been made in 
these talks?
    Ms. Sherman. Senator, I share, I think, your deep 
disappointment that we have not made more progress in the talks 
in the P5+1. The P5+1, all countries have stood united in 
putting what we think is a very reasonable and balanced 
confidence-building measure proposal in front of Iran so that 
we could address their over 5-percent enriched uranium in the 
short term, to ultimately get to full compliance with the U.N. 
Security Council resolutions, which is our objective.
    Iran has responded to that proposal by putting very little 
on the table and asking a lot in return. When Cathy Ashton has 
dinner with Jalili this evening, her message to him will be 
that we are united, that unless Iran is ready to have serious 
talks where they put substantial response on the table it will 
be very difficult to sustain the P5+1 negotiations.
    Senator McCain. At any time are we going to say enough is 
enough?
    Ms. Sherman. I'm sure that time will come. As the President 
has said, he----
    Senator McCain. You are sure the time will come that enough 
is enough and we will take action in order to----
    Ms. Sherman [continuing]. The President has said, as have 
leaders around the world, including the Prime Minister of 
Israel, that there is still time for diplomacy, but that time 
is not indefinite. We are in very close consultation with our 
partners and allies around the world on that clock, on that 
timetable, on our considerations, and the President means what 
he says when he says that we will not allow Iran to have a 
nuclear weapon.
    Senator McCain. On the overflights that were mentioned, I 
think we should be frank with the American people and the 
Congress. We are not stopping those overflights and we are not 
getting inspections, and those that are inspected are 
preplanned so that the inspection shows that there are no 
weapons being delivered from Iran to Syria. And the fact is we 
know, absolutely know, that roughly one flight a day is going 
into Damascus filled with arms and weapons for the use of 
Bashar Assad.
    Again--and by the way, I vigorously dispute your depiction 
of events of why we did not leave a residual force behind, and 
I can tell you that Lindsey Graham, Joe Lieberman, and I were 
in the middle of that. In the words of the Chairman of the 
Joint Chiefs of Staff, the number of people we were going to 
leave behind, in the words of the Joint Chiefs of Staff, 
``cascaded down'' to 3,500 and Malaki decided it was not worth 
it to continue that. We refused steadfastly to give them a 
number for a long period of time when we could have concluded 
an agreement, and we are paying a very, very heavy price for it 
as Iraq begins to unravel. But that is not the subject of this 
meeting.
    When the President of the United States has a redline on 
use of chemical weapons in Syria and the evidence is pretty 
strong that they are using chemical weapons, and yet now the 
President says that the United Nations would have to 
substantiate that usage, when the United Nations cannot get 
into Syria, there is a certain lack of credibility there if we 
are going to rely on the United Nations to corroborate whether 
Bashar Assad has used chemical weapons when the United Nations 
cannot get into Syria to find it out.
    Ms. Sherman. Senator, we are continuing our own efforts. We 
are not just relying on the United Nations. That certainly 
would be one avenue. But we are relying on our own avenues to 
substantiate the intelligence community's assessment, which was 
made public, that they believe, with varying levels of 
confidence, that at least on two occasions small quantities of 
chemical weapons were used by the regime.
    We take this extremely seriously, as we do the Scud 
launches, as we do the destruction of that country, as we do 
the 82,000 deaths and the millions of people who have been 
displaced or become refugees.
    Senator McCain. None of which were the redline articulated 
by the President of the United States.
    Do you believe that the Iranians have continued to 
dramatically increase their assistance to Bashar Assad, say in 
the last year?
    Ms. Sherman. I would have to look more carefully, but I 
would suspect that they have.
    Senator McCain. I thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Kaine.
    Senator Kaine. Thank you to the witnesses. The committee-- 
I think we are all together on the national mission to block 
Iran from getting a nuclear weapon, and we have to have 
military options on the table to do that because it would be 
too destabilizing in the region. But we do all want to prefer 
the point that the Prime Minister of Israel made, which is if 
there is still a window for diplomacy or sanctions, nonmilitary 
options, to work, we need to give them our best.
    I am wondering a little bit. If you look at the history of 
when sanctions work and how or when nations have voluntarily 
turned away from the development of mass destruction weapons, 
nuclear weapons, you can derive some lessons from it. It 
strikes me that if we are pursuing the diplomatic, the 
nonmilitary option, to look at it in a clear-eyed way, to use 
your phrase, Secretary Sherman, Iran is not likely to back away 
from a nuclear program because the United States sanctions were 
so successful that we were forced to do it. Backing away for 
that kind of reason would mean a complete loss of internal 
political legitimacy.
    So they have to have a reason to back away from a nuclear 
program other than, OK, the United States beat us. If it is a 
game of arm-wrestling, they are not going to admit that they 
lost. They have to have a reason to back away that can maintain 
some political legitimacy within their political context.
    As you are engaging in the diplomatic effort surrounding 
this, how creative are you being about not just we will let up 
on the sanctions, but other things that would enable internal 
face-saving, essentially, because I think that is part of any 
negotiation. Do not completely paint your opponent into a 
corner from which they have nothing to do but aggressively come 
out fighting.
    Ms. Sherman. Well, thank you for your question, Senator. 
Actually, I think that the dual-track approach provides that 
way out for Iran should the Supreme Leader decide to take it, 
because he could say if he accepted the terms of our 
confidence-building measure that he has begun--although the 
sanctions relief we put on the table is not significant, it is 
meaningful, he could say to his people that he has started back 
down the road for economic possibility for his country, after 
facing a devastating economy, which is devastated, quite 
frankly, not only by our sanctions, but by extraordinary 
economic mismanagement by President Ahmedinejad. It is not just 
our sanctions that have undermined Iran's economy.
    I think if we look back at the history of Iran and the 
Iran-Iraq war, it was at the point at which the then-Supreme 
Leader, not the same one as today, believed that he might lose 
control of his country when he thought that the devastation was 
too great for him to hold on that he, in fact, ended things and 
came to a settlement.
    So it is our belief, and the intelligence community 
supports this and can talk about more in closed session, that 
increased pressure is part of the solution here; that this is a 
culture of resistance, but at some point they will and can make 
the strategic decision to truly deal on their nuclear weapons. 
I think we can give them an avenue out, but they have to decide 
to take it and, sadly, I do not think they have yet made that 
choice.
    Senator Kaine. How do you interpret the Supreme Leader's 
comment that nuclear weapons are contrary to the religion? Is 
that just happy talk? Is it PR? Is it an effort to open up a 
little window for discussion? What is your best interpretation 
of those comments?
    Ms. Sherman. It is indeed so that a fatwa has standing 
until the Supreme Leader might issue another fatwa which would 
have another standing. So it is meaningful, but it is not 
sufficient to ensure that, in fact, they are not going to move 
to a nuclear weapon.
    Senator Kaine. Do you interpret it as just complete PR or 
do you actually view it as some statement that is possibly 
meant to create some space for dialogue?
    Ms. Sherman. I think it has some meaning in Iranian 
culture. I think the Supreme Leader believes that he is 
conveying a message to us. But at the end of the day the only 
thing that matters is concrete results, not just words.
    Senator Kaine. One of the next results or bits of evidence 
we will see is who the Guardian Council clears to be 
Presidential candidates first, and then what happens in the 
elections. You probably will not see any major change in 
direction until after the elections, but you will be able to 
derive some maybe feel for the situation from seeing who the 
Guardian Council clears as Presidential candidates, is that not 
the case?
    Ms. Sherman. I think it will give us some indications, but, 
as I said earlier, the nuclear file is held by the Supreme 
Leader and the Supreme Leader only.
    Senator Kaine. But the Supreme Leader would have a 
significant hand as well, if I am right, with the Guardian 
Council's approving of Presidential candidates.
    Ms. Sherman. Absolutely. He will have a significant hand. 
And the other thing I will say is, depending upon what happens 
in the Presidential election and their domestic economy means 
that he will have to make some calculations about how at risk 
his domestic economy is and what that means for the nuclear 
negotiation.
    Senator Kaine. I want to switch to Syria for a minute. The 
chairman has a resolution that I think the committee is going 
to be wrestling with next week dealing with Syria. So here is a 
question and probably the only right answer is ``It depends.'' 
But in looking at what we might want to do vis-a-vis Syria, the 
effect of actions in Syria on Iran is obviously a significant 
factor we ought to consider. So if the Assad government were to 
fall, that could mean a number of different things, but play 
that forward in terms of an Assad government falling in terms 
of some likely consequences in Iran, either generally or as it 
pertains to the specific question of the Iranian nuclear 
program?
    Ms. Sherman. I would urge you to put that question to the 
briefer when you have the classified session for the 
intelligence community assessment. But I would say that clearly 
Syria matters enormously to Iran. We are obviously most 
concerned about their nuclear program because Iran with a 
nuclear weapon would increase their ability to create regional 
instability and hegemony in the world. Their efforts in Syria 
are really more about gaining a strategic foothold regionally 
and projecting their power and their influence.
    So to lose in Syria is to lose their position with 
Hezbollah to some extent, to lose their position with their 
ally Assad. Whether that would increase their resistance on the 
nuclear file in the short run or create an opening I think 
remains to be seen.
    But we all have to understand that what Iran is trying to 
do is not just about a deterrence of a nuclear weapon. It is 
about projecting power and getting a foothold from Persia to 
the Arabian Peninsula.
    Senator Kaine. Thank you.
    Thank you, Mr. Chair.
    The Chairman. Thank you.
    Senator Risch.
    Senator Risch. Thank you, Mr. Chairman.
    First of all, I think Senator Kaine makes an excellent 
point and that is that we can turn the screw as tight as we 
want, but that probably is not going to do the job. It is going 
to be some kind of an internal situation where their 
administration feels they are losing a handle. The only place I 
would part ways with you is for us providing the door. I do not 
know that we can provide the door. I think if they make the 
decision that they are not going to proceed with this, they 
will find their own door. They are much better at finding a 
door than we are. Nonetheless, we need to give them every 
opportunity to do that.
    This is what troubles me. I do not know how many hearings I 
have been to on this here, in the Intelligence Committee, in 
other committees, and we talk and we talk and we talk, and it 
is always the same. Nothing changes. This has been going on for 
years. The longer we talk, as Senator McCain pointed out, the 
larger the stockpile they get of the materiels they need to 
construct a weapon.
    Every one of us had--not all of us, but I suppose most of 
us in our class when we were little kids--had that kid that 
just misbehaved. And every day the teacher warned him, and the 
teacher warned him over and over and over, but nothing ever 
changed. He was always a problem and it just continued. And 
then all of a sudden they decided to do something about it. 
Well, then there was this huge shock by everybody involved: 
Well, how come they are expelling him, or how come they are 
doing this, or how come they are doing that?
    My fear is that is where we are headed here. I mean, it 
astounds me, but I do not believe that the leadership in Iran 
believes that somebody is going to pull the trigger on them. I 
really do not believe it, because it is gone on so long. They 
get up every morning, they enrich, they enrich all night long, 
they enrich all day long. The sun goes down, the sun comes up, 
and every day is the same.
    But I believe somebody is going to pull the trigger on 
them, and then we are all going to be sitting here wringing our 
hands.
    What can we do to change this dynamic? I am just, I am 
tired of it. I am exasperated with it. And I guarantee you 
someone else in the world feels the same way about this and it 
is going to end and it is not going to end happy.
    So give me your thoughts on that?
    Ms. Sherman. Senator, I think all of us share your frustra- 

tion and share your concern. I will say this. In the time that 
I 
have been doing the P5+1 negotiations and, as Under Secretary 
Cohen mentioned in his testimony, there is some slight 
movement. Whether that is going to amount to a hill of beans I 
do not know yet. But by that I mean, in this last session that 
we had in Almaty there was a lot of direct conversation all 
about their nuclear program in a way it had not before.
    The Iranians did put something on the table. It was just 
too small. They have taken steps to convert some of their 
enriched uranium into oxide so that now they have, according to 
the IAEA, about 167 kilograms of above 5 percent, near 20 
percent, enriched uranium that has been converted, so that they 
stay below the infamous line that the Prime Minister of Israel 
drew at the U.N. Security Council. So they are trying to, in 
essence, respond in their own way to the international 
community's concerns.
    It is not what we want as a response, but it shows they are 
paying attention. As the Under Secretary mentioned, in this 
last Almaty session they raised for the first time wanting 
sanctions relief. They talked about specific sanctions relief 
they wanted. So clearly now they are willing to say, yes, the 
sanctions matter. They do want to see an end to them.
    So these are very slight, very, very slight cracks. As I 
said, I do not know whether they will amount to a hill of 
beans.
    While that is happening, we are not stopping with the 
sanctions alone nor the negotiations alone. Whether it is our 
military force posture or things that we can discuss in a 
classified session, we are using every vector we possibly can 
to put pressure on what Iran is doing and to stop them from 
doing it.
    Senator Risch. I appreciate that, but again what you just 
described is exactly what has happened before. They give you 
just enough to slow you down, just enough. You said, well, they 
talked about wanting sanctions off. They do not need to talk 
about wanting sanctions off. All they have got to do is do and 
then the sanctions will come off.
    Ms. Sherman. Quite agree. The onus is on them. Quite agree.
    Senator Risch. And you talk about now, well, they have got 
this stockpile now of 20 percent. I remember when the redline 
was going over 5 percent. I mean, everybody in this room 
remembers that: By golly, they better not go over 5 percent. It 
is like the little kid in the classroom: By golly, you better 
not throw another spitball. But somehow he does, and life goes 
on.
    So it is discouraging. At some point in time it is just 
going to end, and everybody is going to be wringing their hands 
and saying, how did this happen? You know, if you keep doing 
the same thing you are going to keep getting the same results, 
and that is exactly what has been happening here for years and 
years.
    Mr. Cohen, I would like your thoughts in the short time we 
have left.
    Mr. Cohen. Well, Senator, I think one thing that has 
changed in the last several years is the intensity and the 
effect of the sanctions, and in particular the financial 
sanctions. I want to return to a point that I made earlier, 
which is the impact of a provision that went into effect 
earlier this year which, as we have talked a lot this morning 
about Iran selling less oil, we have also now put into place 
through legislation and through actions that we have taken a 
mechanism that makes it very difficult for Iran to get access 
to the revenue that it is earning from its dwindling oil sales.
    So even as its sales are going down, it is now being 
stressed in a much more significant way because it cannot get 
access to those revenues in a way that the Iranian Government 
wants. That is different. It is different than what we had in 
place last year. It is certainly different from what we had in 
place several years ago.
    We are looking for additional mechanisms, working with 
Congress, working through our own authorities, to continue to 
increase the pressure on their access to revenues, their access 
to their reserves. That is all designed to put pressure in 
particular on the value of the rial. One thing that we have 
seen in the course of 
the last year is when the rial depreciates and depreciates 
rapidly 
that begins to create a dynamic in Iran that has an effect. It 
has 
an effect on the elites and their perception of how the country 
is 
behaving.
    I think we have an opportunity through increased pressure, 
particularly on the reserves, on revenue, on the rial, to 
create a dynamic that creates the incentive for the 
negotiations that Under Secretary Sherman is engaged in to 
potentially work. No one knows whether ultimately they will 
succeed. But I do think this dual-track strategy creates the 
environment in which there is some potential for a diplomatic 
resolution.
    Senator Risch. Mr. Cohen, I hope you are right. But 
unfortunately, these are the same things we heard when we 
originally put the sanctions on. They are the same things we 
heard when we ramped up the sanctions the first time. They are 
the same things we heard when we ramped up the sanctions the 
second time.
    I mean, there is no doubt that we are making life somewhat 
inconvenient for them. But for crying out loud, over this long 
period of time, if we cannot do it with those sanctions they 
obviously are not getting the job done to the point that we 
want to see the job done.
    With that, my time is up. Thank you very much, Mr. 
Chairman.
    The Chairman. Senator Coons.
    Senator Coons. Thank you, Chairman Menendez. I just want to 
start by thanking you, Mr. Chairman, for your tireless, 
unrelenting, and focused leadership in this body on ensuring 
that we are working in partnership to impose on the Iranian 
regime the strongest, most sustained sanctions regime possible. 
That is to Senator Corker and to my other colleagues as well, 
those who are new to the committee and those who have served in 
previous Congresses.
    I am encouraged to hear, Under Secretary Sherman, in your 
written testimony that you are determined to face one of the 
greatest global challenges the United States and our allies 
face in Iran. In their support for terrorism, in their support 
for the murderous Assad regime, and in their demonstrated 
efforts to achieve a nuclear weapons capability. That you are 
determined to use, and I quote, ``all elements of American 
power'' to prevent them from achieving those objectives.
    I share that goal. I share the frustration expressed by my 
colleague from Idaho that this seems to go on and on and on 
and, while diplomacy is the preferred outcome, I am distressed 
by what seems to be endless cycles of negotiations. So in my 
view we need to be unrelenting in imposing tougher and tougher 
sanctions and in being willing to use force in order to prevent 
the acquisition of a nuclear weapons capability by Iran.
    Let me move, if I might, to Africa. I am the subcommittee 
chair. We have seen both in recent arrests in Kenya and in a 
variety of efforts, that the Iranians are trying to use their 
oil, their resources, in a so-called ``charm offensive'' across 
the continent. They are seeking diplomatic allies and they are 
seeking economic allies.
    What are we doing to ensure that our allies, that our 
potential partners in Africa, are not enmeshed in their 
efforts? And what more could we be doing to engage our allies 
on the African Continent in our efforts insisting on the 
toughest sanctions possible?
    Ms. Sherman. Thank you, Senator. We very much share your 
concern about what Iran is doing around the world to create 
destabilizing activities and to, in fact, through proxies like 
Hezbollah really commit terrorist acts. As you mentioned, Kenya 
has just rolled up a potential cell in their country. Other 
countries have as well. Every one of our ambassadors is aware 
of and made aware of any activity by Iran in their country.
    We try to go into countries where Iran is trying to 
establish a foothold and tell them what to expect and what will 
be coming at them. So we are very vigorous, all of our 
embassies are in this regard.
    I know that you must be concerned, for instance, that 
Iranian President Ahmedinejad visited Niger in April. That was 
the first time an Iranian President had gone to Niger. We were 
very concerned about this. Everyone here is well aware of 
uranium because Niger is the world's fourth-largest producer of 
uranium, a source of uranium for France. And we are glad to say 
at least that President Issoufou confirmed that this was not 
discussed with Iran and that they were both members of the 
Nuclear Nonproliferation Treaty and it wouldn't be appropriate.
    However, we are going to stay on top of this both in normal 
channels and intelligence channels to make sure that there is 
no development of a relationship that would increase the risks 
that we all face, that you and Senator Risch and everyone on 
this panel has discussed regarding Iran's ambitions in the 
world. So we are very focused on this.
    Senator Coons. Thank you, and I look forward to hearing 
from you and from our chair for other opportunities for us to 
continue to strengthen and enforce sanctions. I frankly think 
that we are only going to see progress in this relationship if 
sanctions multilaterally are sustained and imposed in a broader 
and tougher way.
    Let me ask just one other question if I might. You 
reference in your written testimony three Americans. I wanted 
to particularly raise Amir Hekmati, an American veteran, a 
United States marine who served in Afghanistan, had never 
previously traveled to Iran and has now been in prison several 
years without representation, mostly in solitary confinement. I 
understand his father was diagnosed with terminal brain cancer. 
I recognize that United States-Iranian relations are in many 
ways at their lowest ebb in recent years. What, if any, 
prospects do we have for securing the release of Amir Hekmati, 
and what else might we do?
    Ms. Sherman. As I mentioned earlier, we are concerned about 
Amir Hekmati, Saeed Abedini, and of course Robert Levinson. 
Hekmati, as you know, was sentenced to death before having that 
sentence mercifully remanded. We are very concerned about him. 
We have on multiple occasions asked the Swiss, who are our 
protecting power in Iran, to ask for consular access, to ask 
after his welfare. They have done that. They have not been 
allowed to have consular access because Mr. Hekmati is a dual 
national citizen and they do not recognize dual nationalities.
    We remain very troubled by reports about his health 
condition. We understand that he was held in solitary 
confinement, endured a hunger strike. So we will continue to 
pursue through diplomatic engagement every way we can that Mr. 
Hekmati is returned safely to his family.
    For each of these families, we have someone in Consular 
Affairs who stays in touch with families on a regular basis. We 
look for things that we can do in any format. Of course, in the 
case of Mr. Levinson we work very closely with the FBI. We just 
do everything we possibly can.
    Senator Coons. Thank you.
    I want to thank you both for your service and for your 
relentless focus on this most significant security threat. Not 
just regionally to many of our allies, but I think to our 
Nation directly as well.
    Thank you, Mr. Chairman.
    The Chairman. Senator Murphy.
    Senator Murphy. Thank you very much, Mr. Chairman. I want 
to add my thanks to Senator Coons and others on this committee 
for your laser-like focus on preventing Iran from obtaining a 
nuclear weapon, and I want to thank our guests here today for 
what I think has been a very statesmanlike focus on this 
problem, and appreciate their continued willingness to leave 
military options on the table as a last resort.
    I also want to thank my colleagues for turning some of this 
focus to Iran's role in Syria. Having just returned from the 
region, one of the things that I came back disturbed by was the 
impressions given to some people visiting the region about a 
very optimistic assessment about what would happen with respect 
to Iran's role in the region should Assad fall. I know you 
talked a little bit about that earlier, but I think we are 
deeply naive if we believe that the Iranians are going to walk 
away after Assad's fall and I think we should educate our 
decisions as policymakers as we think about what level of 
military participation we are going to have in the region. I 
came back convinced that we could potentially find ourselves 
simply arming one side of a long-term civil war there.
    I wanted to ask you both about your assessment of the 
specific status of the nuclear program. I think Senator McCain 
talked a little bit about this, but it has been our 
government's assessment that Iran has not made a decision yet 
to develop a nuclear weapon. I guess my questions are multiple.
    I would like to ask you what you believe are the 
circumstances that would prompt the regime to make a decision 
to obtain a weapon? What would be the short-term likely outcome 
of that decision, and then an assessment of how long it would 
take them to obtain a weapon once they have made that decision? 
If you could speak to your general assessment of the status of 
their internal decisionmaking processes and then timetables if 
they were to make a different decision than we believe they 
have made today?
    Ms. Sherman. Thank you, Senator. As the President and 
others have noted, we currently assess that it would take Iran 
a minimum period of approximately 1 year if it made a decision 
today to acquire a nuclear weapon, and we assess that they have 
not yet made that decision and it would be made by the Supreme 
Leader.
    That effort to acquire a nuclear weapon would involve both 
reduction of a sufficient amount of highly enriched uranium for 
one nuclear weapon and the completion of various weaponization 
activities needed to fashion a working nuclear device that 
could be fitted into a ballistic missile. When you have your 
classified briefing, the briefer can go into more detail about 
what those clocks might look like.
    Right now, as I said earlier, we believe they have about 
167 kilograms of near 20 percent. They have converted a great 
deal of their 20 percent into oxide. This is based on a report 
from the IAEA. We are very concerned--and again, you can get 
this in a classified briefing, how quickly they, in fact, could 
break out to get to highly enriched uranium, which they would 
need to build a nuclear weapon.
    So we are very concerned about this timetable. As the 
President said, there is time for diplomacy, but it is not 
indefinite.
    Senator Murphy. So then if you could speak to what we know 
today about the internal politics that will drive this ultimate 
decision. Obviously, that is directly connected to our 
discussion about sanctions. As you mentioned earlier at least 
once, they have clearly made a decision to stay on one side of 
this line. What are the things that will change that decision, 
and amongst those what are the things that may be outside of 
our control that relate to the internal political dynamics of 
an upcoming election and a very fluid political situation on 
the ground within Iran?
    Ms. Sherman. Senator, I wish I knew for certain the answer 
to all of those questions. If I did I might be able to know the 
best route to get there. So I can give you our assessments, and 
again I think the briefer will give you the intelligence 
community's deeper assessment.
    But I do not think the Supreme Leader has made the 
strategic decision to, in fact, deal on their nuclear program. 
I believe it is all part of a broader projection of power and 
assertion of Iranian authority and point of view, not only in 
Iran but in the region and ultimately in the world.
    I think that we do believe that the imposition of sanctions 
and the pain that is being put on the Iranian regime is having 
an effect, perhaps not yet enough of an effect to change the 
calculus of the Supreme Leader, but on its way potentially to 
doing so. I think we do have to say a thank-you to the European 
Union for the enormous action they have taken to intensify and 
follow the lead of the United States, but also what they were 
able to do with the swift procedure that is used to deal with 
financial banking has helped enormously as well.
    Senator Murphy. But I guess I am asking you a different 
question. I am not asking a question of what prompts them to 
make a decision to drop their weapons program. I am talking 
about what prompts a decision to actually move forward with the 
weapons program. My question is in part, What are the things 
that may be outside of our control? What are the developments 
in the region that could occur that would change their calculus 
to move forward?
    Ms. Sherman. I think that we do not know the answer to all 
of that question, but I certainly think that the fall of the 
Assad regime will have an profound impact. It will either make 
them feel more or less secure. I think that you are quite right 
that they will look for a way to maintain a presence even after 
Assad falls, because Assad will most decidedly fall at some 
point in this process, and they will look for a way to recover 
because they need that position in the region.
    I think there are other actions that could be taken and 
other agreements made. If there is an agreement between Israel 
and the Palestinian Authority for peace in the Middle East, it 
may change the calculus of many players in the world. Where we 
are in Afghanistan, what happens to DPRK's program is watched 
by Iran.
    So there are any number of factors that I think probably 
affect their calculus. But at the end of the day, my own 
experience is that this is ultimately about regime survival and 
survival of the choices they have made about how their country 
is governed, ones that we find extraordinarily repressive to 
their people, and it will be that regime survival that will 
affect their calculus.
    Senator Murphy. Thank you, Mr. Chairman.
    The Chairman. Very briefly, as we have a few minutes left 
before the vote closes, Senator Risch.
    Senator Risch. Thank you very much.
    Ms. Sherman, one of my constituents is one of the three 
people that are in Iran that are being held. He has been 
sentenced to 8 years in prison. The prison conditions there, as 
you know, are absolutely deplorable. He has just been put in 
solitary confinement for some time, was released. His health is 
questionable.
    First of all let me say I understand the frustration in 
dealing with this. It is very difficult to explain to people 
back home in Idaho. He is a pastor there. His only crime is 
preaching the Christian religion and for that he has received 8 
years in these awful conditions.
    I want to underscore for you that people really want to see 
this brought to an end. Now, having said that, I understand 
because of the relationship between the two countries it is 
almost impossible to deal with this, particularly when we are 
dealing through back channels and through third parties. But on 
behalf of Idahoans, I want to communicate to you how incredibly 
important this is to us, and we want to enlist you, as I know 
you have done, to make every effort you possibly can to secure 
his freedom.
    Ms. Sherman. Senator, we will absolutely do so. As you say, 
Mr. Abedini was spearheading the construction of an orphanage 
in 2009 when he was detained and thrown into prison. Just as 
recently as March 22, Secretary Kerry issued a written 
statement expressing his concern over reports that Mr. Abedini 
had suffered physical and psychological abuse in prison, that 
Iran continues to refuse consular access by Swiss authorities, 
who is the United States protecting power in Iran, and calling 
for his immediate release.
    The Swiss have been terrific. They have gone back 
constantly to ask for consular access, because we do assess 
that when we keep asking we at least put a spotlight on the 
treatment that is being given to prisoners and hopefully lessen 
the horrible situation under which they are held. But we will 
not stop for Mr. Abedini, for Robert Levinson, for Mr. Hekmati, 
until they can be returned to their families.
    Senator Risch. I appreciate that, and I agree completely 
that by spotlighting this that does a tremendous amount of good 
in the world court of public opinion. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Just one or two final questions and then a final comment. 
One is, I assume that when we go into closed session on the 
questions about the money given to Karzai that you will be able 
to say how long that has been going? I understand it's been 
going since the Bush administration.
    Ms. Sherman. I think that indeed the briefer will be able 
to do so, and I will ensure that he can.
    The Chairman. Thank you.
    Second, observations made by Senator Kaine with reference 
to the council's selection of Presidential candidates. At the 
end of the day, you have consistently made an observation that 
it is the Supreme Leader who holds the nuclear folder. In that 
regard, would not it be safe to say that, regardless of who 
they allow to run, that that is unlikely to shape the results 
of the Supreme Leader's thinking in this regard?
    Ms. Sherman. Yes. The one thing I would say, Mr. Chairman, 
is that depending upon how the elections go and what that does 
to the domestic environment and the domestic economy, it will 
either open or close more space for the Supreme Leader in his 
decisionmaking. It will be another data point for his 
decisionmaking. But at the end of the day it is him and him 
alone.
    The Chairman. In that regard, you mentioned regime change, 
regime survival. Is it not really one of our challenges here, 
much as I may not care and I do not care for this regime, 
however, is not one of our challenges here convincing the 
Supreme Leader that this is a legitimate effort, a global 
effort, about their nuclear weapons program and not about 
regime change?
    Ms. Sherman. Correct. What we say, and I should have said 
it more explicitly at the start, we are about changing the 
behavior of the regime, not the regime. I agree with you, I 
find the regime odious and certainly not a place I would want 
to live and raise my family. But nonetheless, this is the 
choice of the Iranian people and was the choice of the 
revolution way back when some 30-some odd years ago.
    This is about changing the regime's behavior around their 
nuclear program, meeting their international obligations, 
responding to the concerns of the international community, the 
Universal Declaration of Human Rights, and how we expect 
governments to treat their people, and not to be a state 
sponsor of terrorism.
    The Chairman. Then finally, I appreciate and I think there 
are many who share Senator Risch's frustrations. I am sure the 
administration shares to some degree those frustrations. But is 
it not important if the final option, if all peaceful diplomacy 
tools ultimately yield no result, the result we want to see, 
which is deterring Iran from its nuclear program and its 
nuclear weapons program, and if we have exhausted every 
possible sanction that we could levy, and we come to that point 
in which the clock has ticked to its final moment, is it not 
important to have exhausted all of those efforts before we get 
to that final moment in terms of what may have to be a military 
option, in which then the international community will come to 
the conclusion that we have done everything we could through 
peaceful diplomacy options?
    Ms. Sherman. I could not have said it better, Senator. 
Exactly.
    The Chairman. You can continue on.
    So let me ask--let me just make this final observation. I 
look forward to working with the administration to the extent 
that we can, and I think we can, about some additional efforts 
here to give tools that might continue to perfect our sanctions 
regime in a way that creates further challenges for the regime 
and gets the Supreme Leader to think in a different way, while 
at the same time preserving the coalition that we have, which I 
think is incredibly important in terms of sending a global 
message to Iran.
    With that, you have the thanks of the committee for your 
service and your testimony. The record will remain open until 
the close of business on Friday.
    This hearing is adjourned.
    [Whereupon, at 10:49 a.m., the hearing was adjourned.]
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              Additional Material Submitted for the Record


   OFAC Publication Submitted by David Cohen as an Attachment to his 
                           Prepared Statement
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